Indian specialty chemicals sector eyes growth boost over next few years

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.