Good five years lie ahead for speciality chemical market in India

The speciality chemicals market is likely to clock a compounded annual growth rate of 12-13 per cent over the next five years, with the intensity of speciality chemicals in end-use domestic markets expected to rise, a report has said. The closure of plants in the European Union and China, owing to increasing environmental concerns, has opened doors for Indian manufacturers to invest further in speciality chemicals, according to a report by rating agency Crisil.

"While India also faces threat from environmental concerns, the threat is limited to smaller players and shall serve as an opportunity for larger players to capture the market," it said. Some of the large players have established themselves in global markets like the EU and US and have active export revenue share which will help them seize the opportunity, it said.

Global players are looking to diversify the supply risk, thereby improving export opportunities for Indian players, Crisil added. It noted that prospects of the domestic chemical industry are intrinsically linked with the overall growth in the economy as well as the export market.

India is a net exporter in segments such as dyes and pigments, which is expected to continue. "However, a slowdown in the global economy is likely to hamper the overall growth potential for chemicals. Nevertheless, despite shutdowns in China and lack of capacity additions in other developed countries, India still stands to benefit in the export market.

"Also supporting the growth in India is its ability to manufacture at a lower price compared with its western counterparts. This along with the emergence of established players bodes well for Indian manufacturers," it said. In order to take full advantage of the export market, existing players will have to update their product mix and introduce speciality chemicals in their portfolio and accelerate investments in R&D, the rating agency said.

"Lack of infrastructural development and R&D investment acts as a hindrance to the sector. At the same time, the threat of cheaper imports and unavailability of raw materials also impact domestic production growth. Going forward, government support in the form of feedstock availability and protection from aggressive imports is vital for the industry," Crisil said.