Chemicals

Chemicals

The Indian chemicals industry stood at US$ 178 billion in 2019. It is expected to reach US$ 304 billion by 2025 accounting a CAGR of 9.3%. The demand for chemicals is expected to expand by 9% per annum by 2025. The petrochemicals demand is expected to record a 7.5% CAGR between 2019 and 2023, with polymer demand increasing at 8%. The agrochemicals market is expected to witness an 8% CAGR to reach US$ 3.7 billion by FY22 and US$ 4.7 billion by FY25.

The chemical industry in India is diversified to large extent. It produces around 80,000 commercial products mainly in the following categories:

  • Inorganic And Organic
  • Drug And Pharmaceutical
  • Plastics And Petrochemicals
  • Dyes And Pigments
  • Specialty Chemicals
  • Pesticide Agrochemicals And Fertilizers

The specialty chemicals constitute 22% of the total chemicals and petrochemicals market in India. The demand for specialty chemicals is expected to rise at a 12% CAGR in 2019-22.

The 5 triggers for the speciality chemicals according to the JM financial report are- (1)domestic availability of raw material at competitive prices, (2) strong demand growth in consumer industries and a domestic industry that supports ‘premiumisation’ of products, (3) competitive manufacturing costs, (4) investment in R&D and (5) an ecosystem that supports the industry and innovation.

India is the sixth-largest producer of chemicals in the world. It is also the third-largest producer of polymers and fourth-largest producer of agrochemicals worldwide. India accounts for about 16% of the world production of dyestuffs and dye intermediates. Indian colourants industry has emerged as a key player with a global market share of roughly 15%.

The growth drivers of the industry are: growing disposable incomes and increasing urbanization along with increasing domestic consumption, promising export potential, policy support- PCPIRs, focus on speciality segments, world-class engineering and strong research and development sector in India. Moreover, the support received from the government is helping the industry to grow at an accelerating pace. There are many associations including but not limited to the department of chemicals and petrochemicals, ministry of chemicals and fertilizers, Indian chemical council, Indian speciality chemical manufacturers association.

< style=”text-align:justify”p>The government initiatives such as 100% FDI, corporate tax deduction, plastic parks, Petrochemical, chemical and petrochemicals investment region (PCPIRs) or special economic zones (SEZs) will enhance production and development of the industry. 

PCPIRs are specifically delineated investment regions with an area for the establishment of manufacturing facilities for domestic and export-led production in petroleum, chemicals and petrochemicals, along with the associated services and infrastructure. To bring further structural changes to the industry, it should expand its business in crude-to-chemicals complexes or refineries set up to cater to the production of chemicals.

The chemicals industry is going through a significant period. Several trends are combining or colliding to create a very different future. The transformation in the sector is powered by globalization, digitalization, regulatory pressures, and technological improvements driving product and chemical formulations.  Many of the established players are becoming increasingly aware of the changing scenario. One can anticipate the transforming landscape from the increase in interest in Mergers and Acquisitions. 

This new world creates both threats and opportunities for chemicals companies. To be successful in the future, they will need to be much clearer about how they create value for customers in ways that their competitors cannot. Even if companies choose to stick with their current value propositions, they will need to build new business capabilities map if they want to continue being successful in the new environment. 

So, how should chemicals companies position themselves in this changing landscape? 

Successful companies make a conscious decision about their identity, and their way to play in the market. To make these decisions, companies need to understand which unique capabilities model make the difference in delivering their value proposition better than the competition. Capabilities such as- end to end value chain optimization, rapid commercialization, value-based pricing, sustainability-driven business steering and tailored service level. Then they need to focus all their attention on leveraging those capabilities and turning them into a powerful growth engine that will allow them to win over time. 

The chemical industry in India employs over 2 million people in India. India’s total contribution to the global chemical industry stands at 3.4%. Its present GVA is about 1.24% and has an export share of 12.5%. India ranks 14th in exports and 8th in imports of chemicals (excluding pharmaceuticals products) globally.

India stands at an advantage due to the US-China trade war. The economic conflict has increased tension between the nations and has impacted the European market as well. For this reason, countries are turning to India to do business, mainly in the chemical sector. The chemical industry in India has the opportunity for significant growth as global companies are seeking to minimize their risk in supply chains that are dependent on China. 

India gained about $755 million in additional exports, mainly of chemicals, metals and ore, to the US in the first half of 2019. The Indian chemical export market is expected to grow at 9% per annum to reach $304 billion by FY25.