Overview of Indian and global chemical industry
The chemical industry is central to the modern world economy having a typical sales-to-GDP ratio of 5-6%. Global chemical production growth slowed down from 4.4% p.a. in 1999-2004 to 3.6% p.a. in 2004-2009, with global chemical sales in FY10 valued at $3.4 trillion. The global chemicals industry is witnessing a gradual eastward shift. The industry is increasingly moving eastwards in line with the shift of its key consumer industries (e.g. automotive, electronics, etc.) to leverage greater manufacturing competitiveness of emerging Asian economies and to serve the increasing local demand. Over the last 10 years, the share of Asia in global chemical sales has increased by 14% points rising from 31% in 1999 to 45% in 2009. With rising concerns around climate change and depleting natural resources, focus on sustainability is another key trend impacting the global chemical industry. Chemical companies are increasingly working towards reducing energy intensity of their operations, minimizing effluent discharge and pollution, increasing the share of recyclable products in their portfolio and diversifying their raw material base to include bio-feedstock. With Asia’s growing contribution to the global chemical industry, India emerges as one of the focus destinations for chemical companies worldwide. With the current size of $108 billion1, the Indian chemical industry accounts for approximately 7% of Indian GDP. The chemicals sector accounts for about 14% in overall index of industrial production (IlP). Share of industry in national exports is around 11%. In terms of volume, India is the third-largest producer of chemicals in Asia, after China and Japan. Despite its large size and significant GDP contribution, India chemicals industry represents only around 3% of global chemicals.
Lack of world class infrastructure: Given the poor infrastructure with lack of adequate facilities at ports and railway terminals and poor pipeline connectivity, domestic manufacturers will continue facing difficulty in procuring raw materials at a cost competitive with the global peers. Lack of cheaper raw material availability: Feedstock (naphtha and natural gas) and power are critical inputs for organic chemicals industry. Costs of these raw materials are high in India compared to countries like China, Middle East and other South East Asian countries such as Thailand and Indonesia. Large global capacity addition: Apart from the oversupply in the global markets, there is another cause of concern for domestic manufacturers, with further large capacity additions happening in global markets. For example, globally, methanol industry is expected to witness excess capacity in the future due to a spate of capacity additions in gas rich countries such as Middle East and Russia. India scenario
Indian chemical industry is rapidly growing industry and is estimated at $100 billion (for FY12). Of this the specialty chemicals account for ~23%, i.e. $23.3 billion Specialty chemicals have observed a high growth rate in the past and have grown at 11.5% p.a. since FY07 when the market size was ~ $13.5 billion (Refer Figure III 1).
The past growth has been mostly due to growth in end use industries in the past, which has resulted in increased consumption for specialty chemicals. Going ahead, the growth potential of the specialty chemicals consumption in India will remain strong. it is expected to reach $45 billion by FY17 ($38.5 billion for specialty chemicals and $6.5 billion for agrochemicals) The key segments in Indian markets are: Agrochemicals, Paints & coatings, Specialty polymers, Home care surfactants, plastic additives, textile chemicals, construction chemicals, water chemicals, personal care ingredients, Flavors & fragrances, paper chemicals, printing inks, industrial & institutional cleaners, rubber chemicals etc. This segmentation does not highlight the colorants...
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