Specialty chemicals are a high end version in the chemical supply chain. It is a niche sector and is used in smaller proportions as compared to their commodity grade counterparts. These chemicals increase the performance and provide additional functionality to the end products. The emerging markets globally look promising for the industry as future growth is projected from countries like India, Brazil, China and Korea. With more chemical companies shifting their base to low cost location, the demand for specialty chemicals is projected to rise with an increase in competition. There are better opportunities of growth for chemical companies in emerging markets. It allows the companies to expand the market share by customizing the product offering.
The exports for the industry are also expected to grow by leaps and bounds. This is due to the surge in demand for niche chemical products across major industries. Most importantly, emerging markets have a low cost of labor, supportive government policies and efficient manufacturing capabilities which make it a favorable destination for global companies in the industry. Governments are also developing friendly policies which help in the growth of the industry by encouraging global players to invest in different regions and training the workforce.
The specialty chemical industry is set to grow at an exponential rate in the coming year. Owing to factors like new end use applications and a rise in innovation, the industry has seen a demand for safe chemicals. The niche segment in the global chemical industry offers special chemicals and polymers that have an ability to improve performance. Specialty chemicals are used across various industries like printing, textile, electronic, consumer goods and retail and oil and gas. World’s largest market in specialty chemicals is North America. However, due to an increase in the demand for the niche chemical products in the emerging markets, Asia is set to make a change in the market landscape with major companies shifting their base here.
The global industry is highly mature yet saturated in the developed countries. It is prone to changes due to economic conditions and regulatory compliances. The niche industry is also plagued with the sudden surge in raw material prices. It witnessed a decelerating growth in the developed countries due to an economic downturn which has led to a decline in production and demand from various industries like electronics, construction and automotive. However, in markets like India and China, the industry is witnessing an upward trend.
Speciality chemicals industry in India
India’s specialty chemical industry is valued at $25 billion and has shown 13% growth in the last five years mainly led by domestic consumption. India’s market constitutes 3% of the global specialty chemical market and has a potential to grow to 7% by 2023 with the market size reaching a range of $100 billion.
The applications of the market includes food additives, water management chemicals, cosmetic chemicals, advanced ceramic materials, textile chemicals, specialty paper chemicals, construction chemicals, oil field chemicals and rubber processing chemicals. The industry includes products like catalysts, adhesives and sealants, flame retardants, rheology modifiers, corrosion inhibitors, water soluble polymers, separation membranes, demulsifiers, synthetic dyes, antioxidant and specialty pigments.
Opportunities for growth
The chemical industry plays a significant role in the development of the economy. It is a key enabler for various other industries. As chemicals are consumed in varying proportions, the development of every industry is dependent on the chemical industry. The growth of the industry is driven by domestic consumption and exports. There is a demand in consumer industry, infrastructure and industrial sector that drives the overall growth of the economy.
The environment norms in developed countries are contributing to the growth of exports. There is a slowdown in China which has worked as an advantage for India. The “Make in India” initiative is also expected to add a strong push to the emergence of India as a manufacturing hub for the industry. There is an increasing interest in merger and amalgamations by players across different spectrum. Globalisation of the sector and sustained market opportunities are contributing towards the growth of the industry. Global companies are showing an interest in the Indian market which is driven by consumerism and an investment in research and development.
Challenges
The success factor for any industry is to maintain a favourable price performance ratio. The industry needs to focus on product development and improving product quality to gain a competitive edge in the market. The biggest challenge is adhering to the government regulations. Companies will have to focus on eco-friendly products and processes and address the pollution issue in terms of air and water. Another challenge is the fragmentation of the industry and the lack of scale. Companies should offer differentiated products through an innovative marketing strategy and maintain high levels of regulatory standards.
India can make a strong mark in the global industry since it has an advantage of skilled human resource and a huge consumer market. The government should boost the sector by developing new industrial areas and simplifying the business climate with industry friendly norms for pollution. With a single window tax system, the government can enhance the global outreach and bring a favourable import policy to increase revenue and growth of the sector.
