Speciality Chemicals Market Size, Demand and Impact of PLI Scheme
Specialty Chemicals what makes them so demanding?
Twitter Handle: @shuchi_nahar
Specialty chemicals are particular chemical products that
help in providing a variety of effects to various industries that they cater to
such as textile, ink additives, construction, oil & gas, cosmetics, and
food. Specialty chemicals can be single-chemical formulations or entities whose
composition greatly influences the performance of the customers’ products. These
chemicals are used on the basis of their function and performance. Continuous
R&D in this market has facilitated the development of products with optimum and
advanced features. This is one of the major factors that drive the growth of
this market.
With the easing of lockdown norms, there has been a good recovery
in overall operations of the Indian specialty chemical sector but it’s believed
that full normalcy would still take some time especially for industrial
chemicals.
Global Speciality Chemical Market Size
The Indian chemical industry has tremendous
potential and a positive outlook, and is set to achieve the USD 300 billion
mark by FY25 and emerge as a global manufacturing hub.
The global Specialty Chemicals market size is pegged at
~USD805b. It is expected to post a ~6.4% CAGR to USD1,170b by CY25. Globally,
~25% of the total specialty chemicals production is exported, amounting to
~USD200b. The EU and the US have historically been key global specialty
chemical hubs. However, after CY08, the focus has shifted to China, facilitated
by lower labor costs, government subsidies, and relaxed environmental norms.
China dominates with ~36% share in the global Specialty Chemicals space, with
exports worth USD35b in CY19 (i.e., ~4x that of India). However, the high
economic growth seen in China has come at a very heavy environmental cost.
Investments in environmental protection have failed to keep pace with the rapid
advancement in the economy.
China has now issued various environmental protection norms
and taken the necessary steps to ensure a sustainable environment – within
which the economy could grow without damaging the environment. Geopolitical
issues: In Jun’18, the US announced the imposition of tariffs on Chinese imports.
This event not only impacted the pricing of goods but also capital spending by
chemical majors. The US-China trade war resulted in supply uncertainties in
western countries. De-risking from a single concentrated source (i.e., China)
presents an opportunity for countries such as India.
India is one of the fastest-growing countries globally -
average GDP growth of 7% in the last 20 years. India’s National Income is growing
at a CAGR of 11%, Will be among the 5 largest world economies by 2025. India
will surpass China and become the most populous country by 2023.
Favorable
demographics – world’s largest youth population. India is on the move: Cities
are likely to house 42.5% of the Indian Population by 2025. Huge domestic market: The urban market shall account for 2/3rd of consumption growth by 2025. Produce
closer to market.
Increase in demand for Chemicals &
Petrochemicals
India is
poised to emerge as a global chemical and petrochemical manufacturing hub. The government of India has launched flagship programs such as Make in India and
the Aatmanirbhar Bharat Abhiyan to provide much-needed support to this sector
and create a facilitative environment to attract further investments.
Production Linked
Incentive Scheme for the manufacturing sector
The objective of the PLI Scheme
· 1. Competitive & efficient domestic
manufacturing.
2. Attract investment in core sectors & cutting-edge technologies.
3. Make India part of the global supply chains.
4. Enable economies of scale and exports.
Impact and benefits of the scheme
· The minimum production in the country as the outcome of the PLI scheme stands to be around USD 56 billion in the next 5
years.
· Cashback and incentives between 2% and 20% of
the incremental sales revenue (over the base year) and incremental exports
revenue depending on the sector.
· Potential to create ~14 million man-months’
worth of jobs directly from 2021-22.
PLI Scheme Outlay for 10 Sectors (USD
billion)
Import
and export of chemicals and petrochemicals for FY16–20 (in USD billion)
Source: Ministry of Commerce
The
specialty chemicals segment has grown at an impressive rate of approximately
11.7% in terms of value in the last five years. The COVID-19 pandemic had a
positive impact on the demand for flavors and fragrances, personal care
chemicals, nutraceutical ingredients, and surfactants as a result of increased
consumption of hygiene products, packaged foods, energy drinks and
nutraceuticals. The segment has immense growth potential due to the increasing
demand from construction, automotive, packaging, water treatment, home and
personal care, food processing, nutraceuticals, and other demand-driven sectors.
In addition
to the industry’s historic growth trajectory, the Government has taken
progressive steps, such as the economic stimulus package, Production Linked
Incentive (PLI) Scheme, tax and labor reforms, setting up of the National
Infrastructure Pipeline (NIP) and various chemical industry-specific policies
and schemes, including its public procurement policy, mandatory BIS standards,
skill development programs and renewal of the PCPIR policy.
Source: Indian Chemical sector - Presentation
KPMG Report on Speciality Chemicals
PWC Speciality Chemicals
Avendus Speciality Chemical
IBEF
Twitter Handle: @shuchi_nahar
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very informative
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