October 21 in New Delhi, India: Axis Capital study says that the Indian chemical industry is getting ready to take a bigger piece of the global market while China struggles with having too much production capacity that isn’t being used. This is likely to keep chemical prices stable.

The world specialty chemicals sector is expected to grow at a rate of 4% per year, but India’s chemical industry is expected to grow at a faster rate of 15-20% per year between CY22-30. This is because of ongoing spending in R&D, capacity expansion, and smart market positioning.

Indian chemical businesses have been carefully planning how to grow their production plants, putting a lot of money into research and development (R&D), and getting contracts to make supply lines safer.

The United States and the European Union each make up 13 to 15 percent of the world chemistry market. China makes up more than 40 percent of the market.

India’s market share is still only about 4%, but it’s going to grow a lot as global supply chains continue to shift away from China.

They will be able to gain from the trend around the world to outsource work. European businesses want to cut back on their reliance on China because of the high costs there, so Indian companies are coming in to fill the gap.

In India’s top 20 chemical companies, both specialty and bulk, their capital expenditures (capex) have gone up a lot over the past ten years.

Capital expenditures rose from about Rs 33 billion a year in FY12–15 to Rs 70 billion in FY19–21 and then to Rs 116 billion in FY22–24.

Specialty and bulk chemical companies have both seen this increase. In FY24, capex almost equaled the total amount of money invested from FY12 to FY15.

This fast growth has been mostly backed by internal accruals, which have kept balance sheets stable and helped handle working capital well.

Chemical businesses’ gross block saw a compound annual growth rate (CAGR) of 21–23% from FY22 to FY24. This was higher than the 10-15% CAGR seen from FY12 to FY18.

Between FY20 and FY24, the gross block of specialty chemical companies almost doubled. This was possible because higher global material prices increased asset turnover.

Indian chemical companies are working hard to improve their research and development (R&D) teams, try out new chemicals, and offer a wider range of products.

These steps are in line with the current derisking of the global supply chain, which gives Indian players a huge chance to grow.

With contracts from global leaders in innovation, the industry is not only increasing its output, but it is also improving its professional skills, coming up with new ways to do things, and cutting costs to stay competitive.

To keep growing, especially as global competition heats up, the companies will need to be able to come up with new ideas and find ways to cut costs.

China’s recent push to make value-added chemicals for industries like electronics, solar cells, and batteries for electric vehicles could make the market more competitive, which could be bad for companies in the generics segment.

Chinese and European companies might lose market share to Indian companies, but their unique products and backward-integrated operations could help them gain market share through higher numbers, new product launches, and process improvements.