An industry analysis ofIndian Chemical Industry• Submitted by:- Veeraj Vashishtha (NU-MBA)
Facts. • Size is estimated at around US$ 35 billion approx., which is equivalent to about 3% of Indias GDP SIZE • The total investment in Indian Chemical Sector is approx.INVESTME US$ 60 billion and total employment generated is about 1 NT million. • The Indian Chemical sector accounts for 13-14% of totalGlobal exports and 8-9% of total imports of the country. In terms ofPosition volume, it is 12th largest in the world and 3rd largest inAsia.
Facts continued.. • Per capita consumption of products of chemical industry in India is about 1/10th of the world average.Consumption • Over the last decade, the Indian Chemical industry has evolved from being a basic chemical producer to becoming an Growth innovative industry and grows at a rate of 10% per annum. • Fine and speciality chemicals, drugs and pharmaceuticals, dyes and pigments, agrochemicals and fertilizers, pesticides, plastics and petrochemicals etc. What itManufactures
Major Segments• Petrochemicals * Inorganic Chemicals * Organic Chemicals * Fine and specialties * Bulk Drugs * Agrochemicals * Paints and Dyes
Chlor-Alkali & Inorganic Chemicals Sector• At present it is worth US$ 2.5 Billion industry. The segment concentrates on the production of caustic, chlorine, sulphuric Acid etc. The inorganic chemicals are commonly used in detergents, glass, soap, fertiliser, alkalies etc. However, the industry is encountering stiff competition from international players, when it comes to catering to the requirements of the local markets.
Petrochemicals• Petrochemicals Petrochemicals form the biggest category in the chemicals, and it is also one of the fastest growing sectors. The segment is into producing basic chemicals like Ethylene, Propylene, Benzene and Xylene etc, intermediates like MEG, PAN and LAB etc., synthetic fibres like Nylon, PSF and PFY etc, polymers like LDPE/HDPE, PVC, Polyester and PET etc, synthetic rubber like SBR, PBR etc. The key players include: Reliance, IPCL, NOCIL, Haldia and GAIL etc.
Other Segments • . It is one of the fastest growing sectors with market around US$80 million p.a. And many big and small Indian companies form part of it. Fine • The major end user segments include: Textile, Leather, paper, detergent, Specialties rubber, paints, polyester, oil and gas etc. • Out of the 475 drugs used, 425 are locally procured. • Major players in India in bulk drug category include: Ranbaxy, Dr. Reddys, Cheminor, Shasun, Cipla, Lupin, IPCA, Sun, Aurobindo, Bulk Drugs Kopran, Cadilla, Wockhardt. • The average Indian consumption is reportedly low i.e., 1/20th of world average. • The segment has been witnessing a growth of 10% pa and has registered revenue worth US$800 million. • Cash crops like sugarcane, tobacco etc. consume large amount of pesticides, almostAgrochemicals over 60%. Major agrochemicals exports include: Insecticides, Fungicides, Herbicides, Weedicides, Rodenticides, and Fumigants.
Paints and dyes•Indian dyes are in demand world over.•Dyes are principally used in Paints, Inks, Textiles and Polymers.•The total market of paint and dyes is almost US$ 1 Billion, and the growth rateis almost 12%.•There are about 25 large and medium players, which cover 50% marketshare, while 2000 other organized players contribute next fifty percent.Moreover, the per capita consumption is very low in India(400 gms) asopposed to the developed countries(15 kgs).
GLOBAL SCENARIO• The global chemical industry, estimated at US$ 2.4 trillion, is one of the fastest growing sectors of the manufacturing industry.• Despite fuel price increase chemical industry managed to grow at a higher pace.• According to industry reports the pharmaceutical segment contributes approximately 26% of the total industry output and approx. 35-40% is dominated by the petrochemical segment.• Commodity chemicals is the largest segment in the chemicals market with an approx. size of $ 750 billion while the specialty and fine chemicals segment accounts for $ 500 billion.
Continued. • Some of the major markets for chemicals are North America, Western Europe, Japan and emerging economies in Asia and Latin America. • The US consumes approximately one-fifth of the global chemical consumption whereas Europe is the largest consumer with approx. half the consumption. • The US is the largest consumer of commodity chemicals whereas Asia Pacific is the largest consumer of agrochemicals and fertilizers.
Strength • A diversified manufacturing base having a capacity to produce quality chemicals from world-class plants. • Vibrant downstream industries in different segments. • Competitive core industries, essential for the development of chemical industries. • Capability to produce world-class end products. • Strong presence in the export market in sub-segments such as Dyes, Pharma and Agrochemicals. • Large domestic market. • Major raw material component sources within the country • Good R&D base and
Weaknesses• -Cost of Power : Very high cost of power, unreliability of supply and frequent interruption. Transmission and distribution losses are very high.• - Cost of Finance : Chemical industry is highly capital- intensive, cost of finance in India is very high, interest rates are 14%-15% p.a. as compared to 2% to 6% prevailing in developed countries.• Lack of Infrastructure India ranked 55th in the world
Weaknesses• Scale of production :- (a) plants were build to cater to domestic needs only. (b)Per capita consumption is low as compared to the world.• Technology: (a) In the days of sheltered economy, up-gradation of technology was not critical. (b) Process Modification used rather than research.
Road Ahead • Highly developed technology • In-depth research capabilities. • Development of domestic capacity to decrease the dependence on imports. • Safety, health and environment protection issues have become the major-talking point in almost all industries and even in the Indian chemical industry too.