Indian specialty chemicals sector eyes growth boost over next few years

04:45 PM @ Thursday - 30 March, 2023

India’s specialty chemicals industry, which is currently seeing an expansion drive by major players, expects to see robust growth in the next few years.

By 2040, India could have a 10-12% share in the global chemicals market growing from $170bn-180bn in 2021 to $850bn-1000bn as per a study by management consultancy firm McKinsey & Co and industry body Indian Chemical Council (ICC).

The specialty chemicals segment is likely to be a key driver of this growth, the study showed, adding that, of the three main segments of the chemical sector – inorganic, petrochemicals and specialty – only specialty is expected to be a net exporter by 2040.

“By 2040, its net exports are expected to rise by around ten times, from about $2bn in 2021 to $21bn,” the report released on 1 March said.

Almost 80% of the specialty chemicals exports are expected to come from four segments—   agrochemicals, dyes and pigments, cosmetics and personal care, and food ingredient chemicals

Agrochemicals in India is currently a $5.5bn market. By 2040, it could account for almost 40% of India’s overall chemicals exports and nearly 13% of the global agrochemical market, the report said.

While the agrochemicals and pharmaceutical firms have seen a continued boost in growth, companies catering to the dyes & pigments, automotive, flavors & fragrances and polymers sectors have been facing a slowdown in demand.

Recessionary conditions in key markets in Europe and the US, and high raw material and logistics costs had slowed down demand growth, market players said, adding that they expected demand to grow over the next two years.

“The operating environment continues to be highly dynamic. The recalibration of global supply chains over the last year due to various points like the sanctions on Russia continues to play out,” said a company official at Deepak Nitrite.

The recent reopening of the Chinese economy will ensure that the demand situation continues to remain dynamic at least for the next couple of months and these developments have affected the supply and demand of key intermediates, he added.

The company has prioritized the export market as domestic consumption in some segments have seen sluggish demand in the recent few quarters, he said, adding that the company is on track with its multiple expansion projects.

Despite the recent demand slowdown, most specialty chemicals producers in India have been expanding capacity over the past few years and producers expect to see a boost in growth once the new capacities come on line.

“In the nine-month period of the current fiscal there was a decrease in demand across some end-user categories. While demand for products in the textiles end-use industry continue to be affected, we expect demand to recover by the first half of next fiscal year,” said a source at specialty chemicals producer Aarti Industries.

The company is currently on an expansion drive and expects to commission its expanded capacities soon.

Aarti recently commissioned a plant at its Jhagadia facility which will service one of its long-term contracts. Other projects, include a brownfield expansion of its nitrochlorobenzene (NCB) facility at Vapi in Gujarat and few other specialty chemical projects, which are expected to become operational in the next financial year beginning April 2023, the company said on its website.

Aarti is also debottlenecking its nitrotoluene capacities to cater to the agrochemical segments.

SRF Ltd has announced capital expenditure plans in its specialty chemicals business totaling Rs10bn ($121.45m) over the last two quarters, which are expected to be commissioned over the next 10-12 months.

Separately, the company will set up a facility to produce an agrochemical intermediate at a cost of Rs1.1bn and a specialty fluoropolymers project at a cost of Rs5.9bn, which will cater to a range of industries that include battery, chemicals, coating, solar, automotive and aerospace.

Recently, specialty chemicals producer Aether Industries announced plans to invest Rs10bn to set up manufacturing plants at Gujarat. Aether produces advanced intermediates and specialty chemicals that are used in the pharmaceutical, agrochemical and other industries.

Anupam Rasayan also plans to set up three new plants at an investment of Rs 6.7bn to cater to the agrochemical, polymer and pharmaceutical sectors in Japan, Europe and the US, it said in a statement on 22 March. The company aims to commission these plants before 2025.

Fertiliser producer Coromandel International Ltd (CIL), recently announced its foray into speciality & industrial chemicals.

“Coromandel’s current capabilities in crop protection chemicals offers a strong starting position and flexibility for play in specialty and industrial chemicals,” Arun Alagappan, executive vice-chairman, CIL, said, in a statement on 22 March.

The company plans to set up new multi-product plants at two of its manufacturing locations, he said.

“With India’s high import dependency in the specialty chemicals, global supply chain diversification trends and strong policy push by the government, these businesses offer significant growth prospects,” Alagappan added.    – ICIS –