Indian PP Supplies Set to Improve After Government Eases LPG Feedstock Restrictions

India’s polyolefins market is expected to see improved supply conditions after the government withdrew emergency restrictions on the industrial and commercial use of LPG. The move follows the easing of geopolitical tensions in the Middle East and the restoration of stable shipping activity through the Strait of Hormuz.

The earlier restrictions had required refiners to prioritize propane and butane supplies for domestic cooking gas needs, limiting feedstock availability for the petrochemical sector. With those measures now being relaxed, polymer producers are preparing for a gradual improvement in raw material supply.

The biggest impact is expected in the polypropylene (PP) market. Over recent months, limited propane availability forced several PP producers to reduce operating rates or temporarily curtail production, tightening domestic supply and increasing dependence on imports.

Industry sources estimate that a significant portion of India's PP production capacity was affected during the feedstock shortage. As propane supplies begin to normalize, major producers are expected to gradually increase operating rates and improve product availability.

However, market participants do not expect an immediate surge in supply. Authorities have retained minimum LPG production requirements, and feedstock allocation will continue to be monitored to ensure a smooth transition. As a result, the recovery in PP production is likely to be gradual rather than abrupt.

Domestic PP prices have remained firm in recent weeks despite weaker seasonal demand, largely due to supply constraints. Improved feedstock availability is expected to ease this pressure over the coming months, although sluggish monsoon-season demand may continue to limit buying activity.

The polyethylene (PE) market is likely to see a less direct impact. Since PE production primarily depends on ethylene derived from naphtha or ethane, domestic PE producers were largely insulated from the propane shortages that affected PP production.

Instead, PE producers are expected to benefit from improved cracker economics. The easing of restrictions will allow refiners and integrated petrochemical producers greater flexibility in utilizing and marketing propane and butane streams, helping improve overall plant profitability.

While the policy change is not expected to significantly increase PE output in the short term, it should support stable operating rates and strengthen the competitiveness of domestic production.

Overall, the government’s decision is expected to gradually improve feedstock availability across the petrochemical chain, with PP likely to see the most noticeable impact through better supply conditions and reduced market tightness.

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