1Q 2023 performance expects to be impacted by inventory destocking, weak demand, and inflationary pressures - Voices from Global Chemicals/ Agrochemicals Players

Global chemicals/ agrochemicals players reported their 4Q2022 and 2022 results. Except for agrochemicals players, generally results remained muted impacted by lower volumes owing to demand weakness and inventory destocking. However product pricing remained resilient supported by RM inflation and high energy costs.  In line with moderation in RM inflation and energy costs, pricing environment is expected to moderate going ahead. 

Reading through the commentaries and outlook for 2023, chemical companies remain apprehensive in near term and expect 1Q2023 performance to remain subdued impacted by inventory destocking, weak demand, and inflationary pressures. Overall, 1H2023 to be marred by volatility and recovery is expected only in 2H2023. 

During Q3FY23, Indian chemical companies reported some moderation in exports and based on the commentaries from global counterparts, we believe that Q4FY23 exports for Indian players may remain subdued. Hence, in near term, expectation of weak near term exports may keep the stock prices under check.

1Q2023 to remain weak for global companies

Except for agrochemical companies, generally, weak sentiment reverberated for 1Q2023 across global chemical companies. Although, RM/ energy inflation has been moderating with inventory destocking nearing end, weak demand is expected to weigh on 1Q volumes.

2H2023 to witness recovery

Inventory destocking is expected to end in 1H2023 and hence companies expect volume recovery only in 2H2023. Nonetheless, declining RM prices and energy costs is likely to impact product pricing which may further impact revenues/ growth.

Key comments from agrochemicals/ crop protection players

Bayer expects flat 1H2023 and accelerating growth in 2H2023 leading to an average 3% growth for 2023, glyphosate prices to normalised further. Corteva expects grain and oilseed planted area expected to be up in most major crop-producing regions in 2023, farm income expected to remain near-record level, although lower than 2022. FMC expects soft commodity prices, solid demand for crop protection products in 2023.

Key comments from specialty chemicals players

Inventory destocking started in 2H2022 and is expected to continue in near term with inventories normalising in 1H2023. Building and construction related chemicals continue to witness weak demand across all the regions. Performance materials players echoed on weak demand and margin pressure which is expected to alleviate only in 2H2023. Paints, coatings players continue to remain concerned on near term volume growth however declining RMs are expected to benefit margins. China opening up is considered as positive by all the players from volume growth perspective.

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