The domestic specialty chemical sector is expected to grow by about 10 per cent annually to almost double the market size by FY25, driven by growth in end-user industries, a report said.
"The Indian chemicals sector is a market worth about USD 160 billion, with specialty chemicals representing about 20 per cent of the value. We expect the specialty chemical sector to grow by about 10 per cent annually to almost double the market size by FY25," India Ratings report on 'FY19 Outlook: Specialty Chemicals' said here.
The specialty chemicals sector registered double-digit growth over FY13-FY17, supported by subdued oil prices and strong domestic and export demand.
Ind-Ra expects FY19 to be a strong year for the domestic specialty chemicals sector on anticipation of a continued increase in demand from end-user industries and tight global supply due to stringent environmental norms in China.
Specialty chemical end-use industries such as textile, automotive, personal care, construction chemicals and agrochemicals, as w ell as application-driven segments such as surfactants, paints, coatings and colorants, to experience high growth in the medium-term.
The governments focus on affordable housing, agriculture and increased expenditure on infrastructure development will further spur demand for performance-enhancing chemicals. Ind-Ra expects strong growth across the key segments of specialty chemicals.
However, per capita chemical consumption in the country remains low compared with that in developed countries and emerging economies such as China, indicating latent demand potential in the Indian market, the report said.
The implementation of strict environmental norms in China has reduced the competitive advantages for Chinese firms, especially inefficient smaller firms that became unviable. In 2017, an estimated 40 per cent of the chemical manufacturing capacity in China was temporarily shut down for safety inspections, with over 80,000 manufacturing units charged and fined for breaching permissible emission limits.
Ind-Ra expects the supply of major chemicals from China to remain subdued in FY19, favourably impacting volume and pricing for Indian exporters.
Higher-than-expected growth in demand, along with stable feedstock availability at low prices and ability to comply with regulatory norms, may further strengthen operating profile of the sector, according to Ind-Ra.
However, the agency believes that sharp changes in oil prices due to an unfavourable macroeconomic scenario, uncertainty about feedstock procurement and an uptick in global capacity expansion may have a negative impact on the sector.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)