India will consume 1 kg of polyurethane (PU) per capita by 2020 at 1200,000 tpa, as per a conservative estimate by the Chairman of the Indian Polyurethane Association (IPUA). Current per capita PU consumption in India is about 200 grams. The 1 kg per capita target will be possible, depending mainly on easing bureaucracy by the government that will speed up some of the processes and make it easy to set up factories and help to build infrastructure, as well as initiatives by the industry. At annual consumption levels of 180,000 tons of Polyurethane (PU) in 2007, India has just about 1.5% share of the global PU consumption of 11.25 mln tons. In the last few years PU has grown at over 15% pa, and is expected to continue to be robust at an average rate of 15%. PU consumption in 2012 could reach more than 350,000 tons and could possibly touch 400,000 tons.
Recent government reforms of the banking sector in India allow an environment where people feel more confident about investing. There is a classic trend in India's rising wealth and it's distribution, where availability of wealth is not only because of foreign investment, but mainly because of domestic entrepreneurs and businesses that are creating their own wealth within the economy. Increased consumer spending power of India’s evolving middle class is fuelling the demand growth for foam products. India has a population of over one billion people, of which it is estimated less than 10% sleeps on a foam-based mattress. Hence there exists a good growth potential growth for PU foam in India. However, the dominance of natural bedding products, at times subsidised or protected by import duties on substitute materials, has also hindered the market penetration of PU foams at times. The Indian bedding market is substantial and dominated by low cost coir (coconut fibre), latex and cotton mattresses, but people are increasingly looking to upgrade to higher quality products made from or incorporating PU foam. As their wealth increases, the comfort of PU foam mattresses is also becoming increasingly important along with rising standards of living in India. Foam production in India is still fragmented and localized, with many small players, while transport infrastructure and distances involved make it difficult for regional producers to expand. The market still requires a lot of development in terms of appropriate products, logistics and technical and marketing expertise. Standards in foam production vary widely among the smaller players, and need to be regulated. PU foam mattresses in India are generally restricted to low and medium density foams that contain lots of fillers. Indian PU market is very price sensitive in relation to alternative, value added products, hence better understanding of the technical issues around efficient, consistent production of good quality foams is also required.
The rising demands of the cold chain and the retail boom will drive demand for commercial vehicles and change the face of the commercial vehicle business. When farmers have little access to cold storage for their products, they are totally dependent on a local market to sell produce. Food rapidly spoils and harvests are damaged without such facilities in India’s hot and humid climate. The cold chain needs a dramatic improvement and this is one reason that demand for PU insulation is rising fast in the country. Insulation for the cold chain is becoming more widely needed, because food prices are going up, and the government is also advocating to build houses which are greener.
North and Western India are major consumers of PU in India, the South is now developing very well, while the East is the smallest segment. Demand from the South is picking up because investments from automotive companies are changing the demand for flexible systems. Seating is by far the largest PU use in the automotive market. India's huge and ever-expanding market for two-wheelers is a growth sector for PU for seat foam. Total new passenger car production in India is around 1.6 million, with two-wheeler production much higher than car production.
India is a very fast growing market for uses such as insulation for construction, elastomers, flexible foam for car seats and also in ISF (integral skin foam) uses in furniture, but specific growth rates vary widely across the different PU segments. PU systems are growing at around 10-12%. Flexible PU applications constitute almost 70% of total PU consumption in India, while rigid applications constitute 21% share. Footwear at 13.5% is the third largest application, as PU soles have been replacing PVC soles in the past decade, and majority of the formal higher priced leather shoes use PU for soles.
Despite some challenges in terms of higher cost and consumer acceptance, a robust GDP growth has improved the standard of living for a large aspiring middle income bracket group, who in order to upgrade their living standards are willing to spend. They have more disposable income, but demand total value for money and will increasingly resort to the use of PU for bedding, insulation and shoe soles. The Indian PU majors will need to show their far-sightedness and step forward and invest in this growing economy. Though the average size of PU foam manufacturer is small in India, the market is growing fast. Consolidation is unlikely because of the growth and the size of the country as the geographical distances throw up opportunities for multiple flexible foamers in different locations, since it is not feasible to ship foam country-wide across India. The PU industry is facing complex environmental challenges and opportunities, which it needs to deal with effectively, or it risks restrictions which will hurt the sector, limiting growth and adding costs.
By 2012, Asia will have 3.5 mln tons capacity for PU materials, or 38% of global capacity. Several upcoming regulatory requirements on occupational exposure issues, emission limits, global warming, as well as the REACH regulations in Europe will pose problems for the PU industry.