FUTURE OF INDIAN CHEMICAL INDUSTRIES

 

The chemical industry in India is positioned to capitalize on near-term opportunities. How private players map their priorities could shape the future of the industry and contribute to trade performance. India’s chemical story is one of outperformance and promise. A consistent value creator, the chemical industry remains an attractive hub of opportunities, even in an environment of global uncertainty. Worldwide trends affecting the global chemical industry could lead to near-term opportunities for chemical companies in India. How chemical players prioritize and tap this value-creating potential could shape the future of the industry in India as well as the country’s trade performance. Agex Pharma is likewise perceived as one of the highest and Certified S Epichlorohydrin (67843-74-7) manufacturer India. 

Growth of Chemical Industry

The chemical sector has witnessed growth of 13-14% in the last 5 years while petrochemicals have registered a growth of 8-9% over the same period. The major growth drivers, behind India’s chemical industry could be listed as follows: 

1.      Structural advantage: With a growing market and purchasing power, the domesticØ industry is likely to growth at over 10-13% in the coming years. Growing disposable incomes and increasing urbanization are fuelling the end consumption demand for paints, textiles, adhesives and construction, which, in turn, leads to substantial growth opportunity for chemicals companies. 

2.      High domestic consumption: The chemicals industry in India is the largest consumer ofØ its own products, consuming 33% of its output. With promising growth trends in the chemicals industry, this internal consumption is also set to rise. 

3.      Diversified industry: The Indian chemicals industry has a diversified manufacturing baseØ that produces world-class products. There is a substantial presence of downstream industries in all segments. Further, this large and expanding domestic chemicals market also boasts of a large pool of highly-trained scientific manpower. 

4.      Promising export potential: Chemicals constitute ~5.4% of India’s total exports. IndiaØ already has a strong presence in the export market in the sub-segments of dyes, pharmaceuticals and agro chemicals. India exports dyes to Germany, the UK, the US, Switzerland, Spain, Turkey, Singapore and Japan.

Global Trends: Uncertainty For The World, Possibilities For India

Six trends are shaping the global chemical industry. While they spell uncertainty in the global context, they could open near-term opportunities in India.

1.      Several global oil and gas majors are turning their sights on downstream chemical opportunities. This may increase the focus on petrochemicals in India, and higher investment in the sector could ease feedstock challenges and boost self-sufficiency.

 

2.      The structure of China’s chemical industry is changing due to stricter environmental norms, tighter financing, and consolidation. While these shifts may benefit select large players in the long run, they could cause uncertainty for international players that source chemicals from China. That could create opportunities for India’s chemical companies in certain value chains and segments, especially in the short term.

 

3.      Trade conflicts have erupted around the world, especially among China, the United States, and Western Europe. These have led to shifts in global supply chains, affecting bilateral trade between China and the United States, with possible repercussions for other economies. Large chemical markets that remain accessible in this scenario could present opportunities for chemical companies in India.

 

4.      Industry-wide, there seems to be a move toward prioritization of core businesses and consolidation on a greater scale, often through big-ticket mergers and acquisitions. For players in India, scale will matter even more, as it could help to fortify their competitive advantage.

 

5.      Digital technology has established itself as a lever to enhance efficiency and productivity. Many companies worldwide are embracing digital’s potential; India’s companies could also tap into this opportunity to expand their profit margins.

 

6.      Sustainability is becoming an imperative, not a buzzword, with various stakeholders placing a premium on it. Chemical companies could prioritize environmental sustainability to protect long-term shareholder value, while continuing to comply with local regulations.

 

Investment Opportunities In India

We analyzed India’s trade flow in the chemical sector to identify and better understand themes for investment. Chemicals are a significant part of India’s overall trade flow, consistently ranking third in imports and fourth in exports for the past five years.Today, India has a chemical trade deficit of $ 15 billion. Analysis of India’s chemical exports and imports, coupled with a review of opportunities emerging from global trends, suggests two themes for investment:

·         Building self-sufficiency in petrochemicals to plug the shortfall of domestic supply of 52 percent (by volume) in petrochemical intermediates: six value chains make up about 77 percent of this shortfall, creating an opportunity worth approximately $ 11 billion.

·         Ramping up exports in select areas, such as specialty chemicals, to obtain a larger share of global value.

The chemical industry already contributes significantly to India’s trade volume. Capturing emerging opportunities in the near term could make a positive difference to India’s chemical companies and to the industry overall.

A charter for industry players

As India’s chemical companies seek to capture opportunities, keep up their above-average TRS, and buy investor sentiment, they could focus on three priorities:

a)      Accelerate to build an at-scale business and take advantage of economies of scale. This could benefit companies in India by opening geographic areas and customer segments; providing exposure to cutting-edge technological capabilities and to economies of scale in capital expenditures and fixed costs; and giving access to alternative and cheaper feedstock.

b)      Use digital and analytics to improve margins. Chemical companies could see an increase of three to five percentage points in earnings before interest, taxes, depreciation, and amortization from Industry 4.0 technologies.

c)      Protect value in the long term through a pursuit of sustainability-beyond-compliance requirements. Companies could seek out more effective approaches to engage with regulatory bodies, focus on decarbonization, and embed sustainability across their organizations—from governance models and corporate culture to capital allocation, feedstock, and products.

In addition, industry players and associations could actively work with the government to address sector-level challenges. Supportive government measures could include an integrated petrochemical and specialty-chemical master plan and fast-tracking the implementation of Petroleum, Chemical and Petrochemical Investment Regions (PCPIRs). The government could continue to work toward the ease of doing business in India by streamlining regulations and processes and by issuing clear directives on future regulatory requirements. Finally, introducing sector-specific skill-development programs and a technology-upgrade fund could boost skill levels and innovation across the industry.