Under the background of global economic downward pressure and destocking, the global chemical industry in 2023 has encountered the test of the overall prosperity, and the demand for chemical products has generally failed to meet expectations.
The European chemical industry is struggling under the dual pressures of cost and demand, and its production is severely challenged by structural issues. Since the beginning of 2022, chemical production in the EU27 has shown a continuous month-on-month decline. Although this decline eased in the second half of 2023, with a small sequential recovery in production, the road to recovery for the region’s chemical industry remains fraught with obstacles. These include weak demand growth, high regional energy prices (natural gas prices are still about 50% above 2021 levels), and continued pressure on feedstock costs. In addition, following the supply chain challenges caused by the Red Sea issue on December 23 last year, the current geopolitical situation in the Middle East is in turmoil, which may have an impact on the recovery of the global chemical industry.
Although global chemical companies are cautiously optimistic about a market recovery in 2024, the exact timing of the recovery is not yet clear. Agrochemical companies continue to be cautious about global generic inventories, which will also be a pressure for most of 2024.
The Indian chemicals market is growing rapidly
The Indian chemicals market is growing strongly. According to Manufacturing Today’s analysis, the Indian chemicals market is expected to grow at a compound annual growth rate of 2.71% over the next five years, with total revenue expected to climb to $143.3 billion. At the same time, the number of companies is expected to increase to 15,730 by 2024, further consolidating India’s important position in the global chemical industry. With increasing domestic and foreign investment and increasing innovation capacity in the industry, the Indian chemical industry is expected to play a more critical role on the global stage.
The Indian chemical industry has shown strong macroeconomic performance. The open stance of the Indian government, coupled with the establishment of an automatic approval mechanism, has further enhanced investor confidence and injected new impetus to the continued prosperity of the chemical industry. Between 2000 and 2023, India’s chemical industry has attracted a cumulative foreign direct investment (FDI) of $21.7 billion, including strategic investments by multinational chemical giants such as BASF, Covestro and Saudi Aramco.
The compound annual growth rate of the Indian agrochemical industry will reach 9% from 2025 to 2028
In recent years, the Indian agrochemical market and industry accelerated development, the Indian government regards the agrochemical industry as one of the “12 industries with the most potential for global leadership in India”, and actively promotes the “Make in India” to simplify the regulation of the pesticide industry, strengthen the construction of infrastructure, and strive to promote India to become a global agrochemical production and export center.
According to the Indian Ministry of Commerce, India’s exports of agrochemicals in 2022 were $5.5 billion, surpassing the United States ($5.4 billion) to become the world’s second largest exporter of agrochemicals.
In addition, the latest report from Rubix Data Sciences predicts that the Indian agrochemicals industry is expected to experience significant growth during the fiscal years 2025 to 2028, with a compound annual growth rate of 9%. This growth will drive the industry market size from the current $10.3 billion to $14.5 billion.
Between FY2019 and 2023, India’s agrochemical exports grew at a compound annual growth rate of 14% to reach $5.4 billion in FY2023. Meanwhile, import growth has been relatively subdued, growing at a CAGR of just 6 per cent over the same period. The concentration of India’s major export markets for agrochemicals has increased significantly in recent years, with the top five countries (Brazil, USA, Vietnam, China and Japan) accounting for nearly 65% of exports, a significant increase from 48% in FY2019. Exports of herbicides, an important sub-segment of agrochemicals, grew at a CAGR of 23% between FY2019 and 2023, increasing their share of India’s total agrochemicals exports from 31% to 41%.
Thanks to the positive impact of inventory adjustments and production increases, Indian chemical companies are expected to see an increase in exports. However, this growth is likely to remain below the level of recovery expected for fiscal 2025 after the downturn experienced in fiscal 2024. If the recovery of the European economy continues to be slow or erratic, the export outlook of Indian chemical companies in FY2025 will inevitably face challenges. The loss of competitive edge in the EU chemical industry and the general increase in confidence among Indian companies may provide an opportunity for the Indian chemical industry to take a better position in the global market.
Post time: Jun-14-2024