Chemicals Monthly Update – January 2025

In January, most chemical prices increased due to efforts to reduce imports and promote local manufacturing, which boosted domestic production. The recent U.S. tariffs on China also created an opportunity for Indian chemical companies, helping them grow. Additionally, planned capital expenditures in the sector are expected to support long-term expansion. However, global chemical companies had a slow start to 2025, with weak demand from industries like consumer products, packaging, and durable goods. In the U.S. and Europe, earnings estimates for many chemical firms were lowered, while in China, demand remained low as manufacturers reduced orders before the Lunar New Year to avoid excess inventory. Production was kept low, and buying activity remained cautious, leading to pressure on prices. Investors are watching potential changes in U.S. trade policies that could further impact the global chemical market.

Despite some challenges, Indian chemical companies continue to see positive trends in pricing. Refrigerant prices have risen in China and India, benefiting companies like SRF and Navin Fluorine. Caustic soda prices have recovered, while isobutanol and sulfuric acid prices increased by 6% and 8% month-on-month, respectively. Ethanol prices also surged by 7%, benefiting key manufacturers. Aniline and VAM prices moved up, while Acetic acid and Phenol prices dropped. In China, soda ash prices fell sharply by 10% after a temporary rise. Acetone prices have also recovered slightly after a previous decline. Overall, the pricing environment for chemicals remains dynamic, with some materials seeing gains while others remain under pressure.

Indian chemical companies are focusing on research and development, adopting new chemistries, and expanding their product range. Government policies, product innovation, export growth, and lower input costs are expected to drive strong double-digit earnings growth for the sector in FY26-27. The recent budget has emphasized the production of lithium-ion batteries, which could benefit Indian companies involved in critical materials and backward-integrated operations. With strong capital investments, higher production volumes, and new product launches, companies like Aarti Industries, Archean Chemical, Clean Sciences, Deepak Nitrite, GHCL, Laxmi Organics, Navin Fluorine, Neogen Chemicals, SRF, and Tata Chemicals are well-positioned to benefit from the growing demand for value-added chemical products.