Indian chemical companies are creating opportunities in certain value chain areas

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

Several global oil and gas giants are turning to the downstream chemical industry. This could increase India's focus on the petrochemical industry, and increased investment in the industry could ease raw material challenges and promote self-sufficiency.

The structure of China's chemical industry is changing due to stricter environmental regulations, stricter financing and integration. Although these changes may benefit some large enterprises in the long run, they may also bring uncertainty to international enterprises purchasing chemicals from China. This may create opportunities for Indian chemical companies in some value chains and segments, especially in the short term.

Trade conflicts break out all over the world, especially between China, the United States and Western Europe. This has led to the transfer of global supply chain, affected bilateral trade between China and the United States, and may also have an impact on other economies. In this case, the large chemical market that can still be accessed may provide opportunities for Indian chemical companies.

From the perspective of the whole industry, it seems that there is a trend to give priority to core business and carry out larger-scale integration, usually through large-scale mergers and acquisitions. For Indian companies, scale will be more important because it helps to consolidate their competitive advantage.

Digital technology has become a lever to improve efficiency and productivity. Many companies around the world are embracing the potential of digital; Indian companies can also take advantage of this opportunity to expand their profit margins.

Sustainability is becoming a necessity, not a buzzword, and all stakeholders are paying attention to it. Chemical companies can give priority to environmental sustainability to protect long-term shareholder value while continuing to comply with local regulations.

Investment opportunities in India

We analyzed trade flows in India's chemical industry to identify and better understand investment themes. Chemicals are an important part of India's overall trade flow. In the past five years, imports have been ranked third and exports have been ranked fourth.

The chemical industry has made a significant contribution to India's trade volume. Seizing the recent opportunities may have a positive impact on Indian chemical companies and the whole industry.

As higher quality requirements and demand related to environmental quality help to increase demand for Indian specialty products, export-oriented companies continue to expand, with an annual growth rate of 13% in India through 2020.

However, in the field of petrochemical intermediates, the situation is completely different. India currently imports about 5 million tons a year, accounting for 45% of its demand, adding up to about 11 million tons a year. China's consumption has been growing steadily over the past five years. Most importantly, if India's economy follows a healthy growth trajectory, our analysis shows that by 2025, the demand for petrochemical intermediates will expand to 33-38 million tons per year.

If these forecasts are realized, India's demand for important petrochemical intermediates will consume the output of several world-class plants for each product by 2025.

For example, the demand for acetic acid and acrylic acid will be equivalent to the output of more than three world scale plants and more than four world scale plants, respectively. The Indian company announced that it will increase production capacity by about 2 million tons per year in limited product areas such as ethylene oxide (EO) and ethylene glycol (eg). As a result, 25 million to 30 million tons of domestic demand can not be met every year - 75% to 80% depend on imports.

These forecasts are so large that demand in India is becoming a major problem for some participants in the chemical industry. The world's leading producers of petrochemical intermediates must consider India's needs when planning how to serve existing and emerging markets in the next 10 years and how to build their own businesses. Indian Petrochemical intermediate consumers are increasingly dependent on imports. Petrochemical intermediates should be an attractive growth business for upstream petrochemical producers in India if they can scale up as other countries have done in the past.

Article source: https://article-realm.com/article/Finance/9925-Indian-chemical-companies-are-creating-opportunities-in-certain-value-chain-areas.html