India's Sole Acetic Acid Producer GNFC Halts 150,000 mt/y Bharuch Plant on Negative Methanol Margins

Gujarat Narmada Valley Fertilizers and Chemicals Limited (GNFC) has halted operations at its acetic acid plant in Bharuch, Gujarat, after methanol feedstock costs pushed conversion margins into negative territory. The 150,000 tonne per year facility is the only domestic source of acetic acid in India, making the shutdown a significant event for downstream sectors that rely on a chemical used in textiles, adhesives, paints, food preservation, and pharmaceutical intermediates.

The decision follows months of squeezed economics in the methanol-to-acetic acid value chain. Producers typically need a price spread of around 55 to 60 dollars per tonne between methanol and acetic acid to break even. That spread has now inverted. Domestic methanol prices climbed sharply across Asia after the closure of the Strait of Hormuz on 28 February 2026, which followed the outbreak of the US-Iran conflict and severed a critical shipping corridor for petrochemical exports.

Methanol is the primary input for acetic acid production through the carbonylation process. Iran alone supplies roughly 9 to 10 million tonnes per year of methanol exports, with additional volumes from Saudi Arabia, Qatar, and Bahrain. India relies heavily on imported methanol, and GNFC has run its three Bharuch methanol units at minimal rates for several years because gas-based domestic output cannot compete with imports under normal conditions. With Middle East supply curtailed, Indian buyers have been sourcing methanol at sharply higher cost from China and other Asian markets, where China futures briefly surged 14 percent and triggered a daily limit trading halt in March.

The pressure compounded when Petronet LNG issued a force majeure notice to GAIL, which then restricted regasified LNG deliveries to GNFC to 60 percent of the daily contracted quantity from 6 March 2026. The cut hit the company's gas-based operations and pushed up the cost of any captive methanol it might have produced. By April, domestic acetic acid prices had been repriced to a higher floor near 58 rupees per kilogram, up around 52 percent month-on-month, but methanol increased even faster, leaving the conversion economics underwater.

GNFC normally supplies roughly 12,500 tonnes of acetic acid per month into an Indian market estimated at around 165,000 tonnes per month. The country imports about 85 percent of its annual requirement, largely from the United States, China, Malaysia, the United Kingdom, and Singapore. With Iran-linked methanol shipments curtailed and Chinese operating rates lower due to multiple plant shutdowns in early 2026, global supply has tightened as well. Indian port inventories had already dropped through the first quarter, with arrivals delayed by rerouted shipping and elevated freight costs.

Downstream industries face an immediate squeeze. Ethyl acetate producers, which use acetic acid as feedstock, were already running at reduced rates and have signalled further price increases. Pharmaceutical intermediates, vinyl acetate monomer for adhesives and coatings, purified terephthalic acid for PET resin, and textile processing chemicals all depend on stable acetic acid supply. Sectoral buyers had been pulling inventory forward through April in anticipation of further price rises, which has helped soften the immediate shock but cannot bridge a prolonged shutdown.

The Bharuch facility uses methanol carbonylation technology licensed from BP Chemicals and is the only plant in India producing acetic acid through the methanol route at industrial scale. Smaller domestic players manufacture through the molasses route, subject to seasonal sugarcane availability and unable to fill the gap left by GNFC. A new world-scale 600,000 tonne per year plant, planned as a 50-50 joint venture between GNFC and INEOS Acetyls and located at the same Bharuch site, is not expected to come online before 2028.

GNFC has not communicated a restart date. Industry participants expect operations will resume only when the methanol-to-acetic acid spread returns to viable levels, which depends largely on the stabilisation of methanol supply and the resolution of the natural gas allocation constraint. The Indian rupee has depreciated by more than 6.5 percent against the US dollar since January 2026, which has further inflated the landed cost of imported feedstock and weighs on any near-term reopening calculation. The Indian government has been advocating an austerity drive that includes import duty adjustments and a broader push to conserve foreign exchange reserves.

For Indian buyers, the immediate response is heavier reliance on imports at a moment when international acetic acid prices are firming. Spot prices have climbed in China, Singapore, and Southeast Asia following multiple plant shutdowns. Importers face a market quoted around 58 rupees per kilogram in Mumbai and 57 rupees per kilogram in Kandla for 60-day credit terms, with vessel availability tightened by rerouting around the Middle East corridor.

The shutdown highlights the structural fragility of India's acetic acid supply chain. With a single domestic producer of 150,000 tonnes per year against demand approaching two million tonnes per year, even short interruptions translate quickly into price spikes and rationing across the chemicals, packaging, pharmaceuticals, and textile industries. The situation also strengthens the strategic case for accelerating the INEOS-GNFC capacity addition and for diversifying methanol sourcing away from the Middle East corridor.

The INEOS-GNFC capacity addition refers to a 50-50 joint venture announced in November 2024 between INEOS Acetyls, one of the world's leading acetic acid producers, and GNFC, India's sole domestic manufacturer. The project involves the construction of a world-scale 600,000 tonne per year acetic acid plant at the same Bharuch site, four times the capacity of the existing facility, with commissioning targeted for 2028.

The strategic rationale extends beyond simple volume expansion. A world-scale unit spreads fixed costs over significantly larger output, lowering the break-even point and allowing continued operation under squeezed feedstock economics that force smaller plants offline. INEOS also brings more recent carbonylation technology with improved catalyst performance and lower methanol consumption per tonne of output, reducing exposure to feedstock price spikes. The joint venture structure further gives the Indian operation access to INEOS's global methanol sourcing network and long-term supply contracts, insulating it from the kind of spot market shocks currently affecting GNFC's standalone plant.

With India importing roughly 85 percent of its acetic acid demand, the project also serves a clear "Make in India" objective. The current shutdown of the 150,000 tonne per year unit, driven by Hormuz-linked methanol disruption and inverted margins, illustrates exactly the structural vulnerability the new capacity is designed to address, and strengthens the case for accelerating the project ahead of its 2028 target.