Chemicals Monthly Update – February 2025

The chemical sector continued its upward price trend in February, with strong demand expected to keep prices firm. India is set to benefit from the recent US decision to impose a 20% tariff on Chinese chemicals, while Indian imports face only a 10% retaliatory tariff. This gives Indian chemical companies a 10% cost advantage over Chinese competitors, boosting export potential in key segments like dyes and intermediates, agrochemicals, and organic and inorganic chemicals.

A similar opportunity arose during the 2018 US-China trade war when India’s exports to the US jumped from $57 billion to $73 billion. A repeat of this trend is likely as US companies seek alternative suppliers. With this cost advantage and a low base from FY24’s export decline, the Indian chemical sector is positioned for a strong rebound. Planned capital expenditure (capex) will further support industry growth.

Global Chemical Market Trends

• Europe: The EU chemical industry continues to struggle with weak demand, low business confidence, and high energy costs, limiting competitiveness.
• China: Chemical production growth is expected to slow to 2.2% in 2025, affected by sluggish household consumption, lower manufacturing activity, and export slowdowns due to tariff threats. While Chinese chemical production remains cost-competitive, oversupply is squeezing margins.

Price Trends in Chemicals

• Refrigerant gas demand remains strong in China, benefiting SRF and Navin Fluorine.
• Heavy soda prices have recovered.
• Acetone (+10%) and Isobutanol (+3%) saw MoM price increases.
• Phenol prices rose 4% MoM, benefiting key manufacturers.
• Methanol and VAM prices moved up, while Aniline and Ethyl Acetate declined.
• Soda ash spot prices in China dropped sharply (-11% MoM).
• Bromine prices have shown modest recovery.

Long-Term Outlook for Indian Chemical Companies

Indian chemical companies are expanding R&D, adopting new chemistries, and diversifying their product portfolios. The sector is well-positioned for long-term growth due to:

1. Specialty Chemicals Expansion – Increasing demand for high-value products.
2. Import Substitution – India’s growing ability to replace chemical imports.
3. China+1 Strategy – Global companies shifting procurement away from China.
4. Government Support – Favorable policies promoting chemical manufacturing.

Companies like Aarti Industries, Archean Chemical, Clean Sciences, Deepak Nitrite, GHCL, Laxmi Organics, Navin Fluorine, Neogen Chemicals, SRF, and Vinati Organics are set to benefit from these trends.

Despite global uncertainties, India’s chemical sector remains well-positioned for sustained growth, with strong demand, policy support, and a competitive cost advantage over China.