Bharat Chouhan
New Delhi ,
■ Hand sanitizers have become one of the most essential products across the world amid the Covid-19 outbreak. This has created a severe shortage of Isopropyl alcohol (IPA), a key ingredient used in making hand sanitizers, in the domestic market, leading to a sharp surge in prices.
■ IPA prices in the import market have jumped from Rs67/kg in Feb’20 to ~Rs300/kg in the last three weeks. In order to regulate the production, quality, prices and other aspects of hand sanitizers, the government has notified that the prices of alcohols (like IPA) used in hand sanitizer manufacturing shall not exceed those prevailing on 05 Mar’20 (IPA price on that date was Rs69/kg).
■ IPA is widely used in the pharmaceutical industry, coating and ink industry, cosmetic industry and speciality chemical industry. Domestic demand for IPA stands at ~200,000MTPA, which is served by 50-50% from domestic and import.
■ Currently, Deepak Fertilizers (DFPC) is the only manufacturer of IPA in India, catering to ~40% of domestic demand with its 70,000MTPA manufacturing capacity. In order to maintain the leadership position in India, it also imports ~50,000MTPA and sells in the domestic market. IPA accounts for ~7-8% of total revenue for DFPC.
■ IPA prices have corrected in early FY20 to Rs52/kg in Sept’19 from the highs of Rs 101/Kg during Nov’18 due to a sharp jump in imports from China and other regions (like Korea and Taiwan) during the period. Currently, the imported price is Rs280/kg.
■ We believe that this is a short-term impact on the IPA prices due to the sharp surge in demand for hand sanitizers and prices will settle down going forward in the range of close to Rs95-100/kg.
■ Other sources that can be used in manufacturing hand sanitizers are ethanol/ethyl alcohol/extra neutral alcohol (ENA), which largely come from sugar mills. The Indian Sugar Mills Association (ISMA) and All India Distiller Association (AIDA) have assured the government of an adequate supply of ethanol for the production of sanitizers in India to meet the rising demand.
■ Indian ethanol production capacity currently stands at around 3.55bn ltrs/month, while demand from the hand sanitizer industry is estimated at ~30mn ltr/month.
■ In this regards it has also been brought into notice by AIDA that all the distilleries can also produce sanitizer in bulk that can be bottled by the sanitizer industry and other industries in order to meet the demand.
