Chemicals Monthly – May 2025 Update

The chemical sector experienced a subdued pricing environment in May, continuing to face multiple headwinds, including weak global demand and pressure across key end-user industries. While H2FY25 failed to deliver the anticipated recovery, Q4FY25 provided some respite with signs of volume recovery and margin improvement supported by operating leverage. The chemical sector is still not out of the woods as dumping continues, and the price environment remains generally weak. We highlight that, despite continued pressure on pricing, operating margin delivery has improved sequentially in Q4 FY25, primarily driven by cost rationalization measures and increased utilization levels. Agrochemicals continued to face delays in recovery due to elevated channel inventory, Chinese overcapacity leading to dumping and a higher interest rate environment. However, the CDMO for pharma exhibited strong visibility and traction, reporting steady growth and a robust order book. As we advance, while some green shoots are visible in select sub-segments, a meaningful recovery will depend on global demand normalization, stabilization of pricing, and easing of competitive pressures from Chinese exports. On the global front, the sector’s competitiveness in Europe remains subdued due to weak demand and uncompetitive energy prices. This is particularly an issue for commodity products and petrochemicals, where China has a competitive edge. The weak demand and declining business confidence continue to challenge the EU27 chemical industry. Global companies are outlining CY25 recovery with multiple cautions. While macro factors such as tariff issues, supply Chain, and Chinese overcapacity are beyond management’s control, Indian chemical companies have performed well in Q4FY25 amid global uncertainties. Additionally, taking into account market conditions, companies have revised their capex guidance for FY26, which should enable them to focus on scaling up recently commissioned projects and improve the quality of their earnings. Overall, despite global uncertainties, the long-term outlook for Indian chemical companies remains optimistic, driven by opportunities in specialty chemicals, import substitution, and rising exports under the China+1 strategy adopted by global customers. The pricing environment in the current month remains broadly subdued, though select categories have shown resilience. Refrigerant prices remained firm, benefiting Indian manufacturers such as SRF and Navin Fluorine due to their robust production capacities and steady demand. Palm oil prices remained elevated following India’s recent increase in import duties. Bromine prices remained stable during the month. On the other hand, key input chemicals such as Acetone and Ethanol witnessed price corrections of 2% and 11% MoM, respectively, while Methanol registered a sharper decline of 10% MoM. Among industrial chemicals, Caustic Soda prices firmed up, whereas Aniline, Phenol, and Ethyl Acetate contracted during the month. India’s gradual pivot from bulk chemicals to specialty chemicals marks a significant structural transformation in the chemical industry. Traditionally driven by high-volume, low-margin bulk production, the sector has seen a strategic shift over the past decade, with several domestic players increasingly focusing on value-added chemicals. This transition has positioned India as a rising force in the global specialty chemicals export market.  Indian chemical company’s long-term growth prospects in the specialty chemicals sector, given a massive revenue opportunity from the perspective of import substitution and a potential rise in exports to global customers. Companies such as Aarti Industries, Archean Chemicals Ltd., Ami Organics, Clean Sciences, GHCL, Laxmi Organics, Navin Fluorine, Neogen Chemicals, SRF, and Vinati Organics are likely to benefit from value-added chemical products.