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Specialty Chemicals Market In India

Energy & Power

Specialty Chemicals Market in India accounts for a major segment of the Chemical Manufacturing. The chemical industry is an essential sector in the industrial development of a country. The industry provides building blocks for several downstream industries including paints, paper, soaps, etc. The chemical sector services several end-use application industries, covering more than 80,000 products. The global chemicals market was estimated to be nearly USD 4 trillion in the year 2019. Specialty chemicals constitute around 20% of the global chemical sector. The top specialty chemicals companies are engaged in sustainability and green technology. These companies are aiming at reducing the carbon footprint and improving the raw material supply. 

Specialty chemicals are a range of specific chemical products that provide a wide variety of effects. Several other industrial sectors rely on various specialty chemicals. Specialty chemicals are manufactured after extensive research and development. This is one of the major differences between specialty chemicals and commodity chemicals. The innovation involved in the production of specialty chemicals results in better margins, profitability, and lesser CAPEX intensity.  Additionally, specialty chemicals have limited core applications, unlike commodity chemicals. The demand for specialty chemicals has increased over the years due to various applications. This has helped in boosting the specialty chemicals market in multiple regions. The major driving factors for the market growth include high demand from the end-user industries such as textile, food, etc.

Global specialty chemicals market overview

The global specialty chemicals industry grew at around a 6% compound annual growth rate over the last five years. This sector was worth USD 805 billion in the year 2019. The specialty chemicals market is expected to reach a value of nearly USD 1.2 trillion by the year 2025. The past decades have witnessed a significant shift in the production of chemicals from North America and Europe to Asia. Asia has become a net exporter of specialty chemicals, which were erstwhile being importer from North America and the EU.

Indian chemical sector

Asia is an attractive market for the global specialty chemicals segment. Specialty chemicals companies in Asia recorded high economic profits of around USD 17.4 million between 2015 and 2018. Japanese companies obtained the highest positive economic profit of nearly USD 45.3 million in the year 2018. China and India generated sales of around USD 21.3 million and USD 6.5 million in the same year, respectively. Between 2012 and 2018, a revenue pool of around USD 60-70 billion in the specialty chemicals industry moved to Asia. This shift stemmed from a marketed increase in discretionary and fundamental consumption among the populations of Asian countries.

India presents a growth opportunity for local players in the specialty chemicals segment. The Indian chemical industry is one of the fastest-growing industries in the world. The Indian chemical sector ranks 3rd in Asia and is the 6th largest in the world for output. The Indian chemical sector was valued at USD 180 billion in the year 2019. This sector generates employment for nearly 2 million people in India.

The Indian specialty chemicals industry is expected to grow at a compound annual growth rate of 12% in the next five years. The specialty chemicals segment was estimated at USD 32 billion in 2019. This sector is projected to reach a net worth of USD 40 billion by the year 2025. This segment accounts for 18% of the total chemical industry in India. The growth of the specialty chemicals sector is mainly driven due to increase in consumption and export opportunity. The Indian specialty chemicals sector is fragmented with a few key players including United Phosphorus Ltd (UPL). UPL is the only domestic specialty chemicals producer with net sales of over USD 1 billion. The company has a strong global manufacturing network. Indian companies need to ramp up readiness to realize maximum advantage from the growth potential of the specialty chemicals sector. Specialty polymers, textile chemicals, dyes, etc. are among the top segments within the Indian specialty chemicals market. Adhesives, flavors, etc are some of the few emerging segments among the 40 specialty chemical segments in India.

India has several advantages over other countries for the expansion of the specialty chemicals segment. India is a country with low-cost manufacturing capabilities, an abundance of human resources, and a highly skilled workforce. These traits have made India a preferred manufacturing destination for key companies across the globe. The country still lags the major developed nations in chemical consumption on a per capita basis. However, the growth in disposable income and increased urbanization have led to the rise in the demand for end-user segments. These segments include the paint, home care, textile industry, etc. This has been one of the major contributors to the growth of the specialty chemicals sector in India.

COVID-19 Impact on the specialty chemicals sector

Specialty chemicals are one of the best performing sectors in 2020, despite the COVID-19 pandemic. Most of the other key sectors bore the brunt of the pandemic led to sell-off in markets. The global specialty chemicals sector has delivered double-digit returns over the last 5 years. This segment is projected to witness an increase in demand in the coming years as well. Asia is expected to contribute nearly 65% to this incremental pool in the specialty chemicals sector. India and China are expected to be the major contributors to the rise in this sector. Asia’s share in the total demand for specialty chemicals is projected to increase to 50% by the year 2025.

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