Chemicals Monthly Update – October 2024

In October, chemical companies faced pricing declines despite rising crude oil costs due to weak global demand. The Indian government continued its anti-dumping measures, investigating and imposing duties on imports like Soda Ash and PVC from various countries to protect domestic producers. Globally, chemical production increased 6.1% YoY from January to July 2024, mainly driven by China. This uptick in production, especially in the EU, is positive for the sector, with a cautious medium-term outlook for Indian chemical companies. Indian chemical firms reported muted Q2FY25 earnings, impacted by soft global demand, geopolitical tensions, and rising input costs. A notable recovery in the sector is anticipated in H2FY25.

Pricing trends remain subdued across most chemicals, although a modest recovery is sometimes visible off depressed levels. HeavySodaAsh and Acetic acid prices have registered a sharp drop of 3% and 6% MoM, respectively. Benzene, Methanol and Aniline prices have advanced, while Acetone, Toulene, and Acetic acid prices contracted during the month. Prices of Isobutylene also remained under pressure.Prices of Ethyl acetate have recovered modestly in recent months after a correction. Monomer and Polymer prices both declinedMoM.Intherefrigerant category, prices of R-22 corrected in November 2024, whereas R-32 was stable.

The chemical industry has made moderate progress in CY24, increasing YoY production above CY23 levels. As we advance, production levels will continue to rise as the destocking cycle wanes and demand rises across most products. However, to further support revenue growth, chemical companies have announced cost-reduction plans and begun to increase margins while continuing to invest inR&Dandcapex plans. In 2025, we expect the industry to continue its recovery, adjusting to new market drivers while balancing short and long-term goals. China’s recent push toward producing value-added chemical products for sectors like electric vehicle batteries, solar cells, and semiconductors could intensify the competitive landscape, posing risks to players in the generics segment. However, Indian companies could benefit from their niche offerings and backward-integrated operations, allowing them to capture market share fromChina and Europe through higher volumes, process innovations, and new product introductions. Companies such as Aarti Industries, Archean Chemical Ltd.,AlkylAmines, Clean Sciences, Deepak Nitrite, GHCL, Laxmi Organics, Neogen Chemicals and Tata Chemical. are the key beneficiaries of this development.