Recent Investments

Part 3

Indian Chemical Industry Challenges and Opportunities

Recent Investments

The Government of India has approved 100 per cent foreign direct investment (FDI) in the chemicals sector. The Chemical Industry (Other than fertilizer) attracted Foreign Direct Investment (FDI) worth USD 10,588 million or Rs 50,908.61 crore between April 2000 and June 2015. In June 2015, the sector has garnered FDI worth USD 101 million, up by 20 fold as compared to USD 4.89 million in June 2014.

Demand Drivers

•Pesticide Manufacturers: Increased awareness about advantages of using pesticides, growth in the number of farmers able to afford pesticides and growth in access has helped push demand for pesticides in the country. In addition, India has emerged as major manufacturing hub for pesticides due to its low cost advantage, building up exports contribution as well.

Other Corporate Investments

The Gujarat State Fertilizers& Chemicals (GSFC) is planning to invest Rs 1,050 crore over the next 2-3 years for expanding its soda ash and textile capacity at itsSutrapada plant in Saurashtra (Gujarat).•Gujarat Alkalies and Chemicals (GACL) and National Aluminium Company (Nalco) signed an agreement for the formation of a joint venture to manufacture caustic soda. As per the agreement, the JV will set up an 800 tonnes per day (TPD) caustic soda plant and an 80-90 MW coal-based captive power plant (CPP) at Dahej, Gujarat.

Other Corporate Investments

Aarti Industries is looking to expand capacities across benzene, toluene & ethylene, and nitro toluene based value chain with a capex of Rs 500 crore over the next 3yrs to cater growing end-user markets and space vacated by closing down of few capacities in developed markets & reduced global supplies from China.Aditya Birla Chemicals (ABCL) has completed the acquisition of the chlor-alkali division of Jayshree Chemicals (JCL). The chlor-alkali division of Jayshree chemicals comprises caustic soda manufacturing unit at Ganjam in Odisha and salt manufacturing facility at Pundi in Andhra Pradesh

Other Corporate Investments

Navin Fluorine International’s subsidiary NFIL UK has acquired balance 49 percent stake in Manchester Organics, UK at pound 6.3 million. The subsidiary had acquired 51 percent stake in Manchester Organics, UK in May 2011. Manchester Organics is engaged in specialized chemical research.

Exports and Imports

Chemicals are one of the most widely used input materials in the world finding applications in almost all manufacturing sectors. With the increase in industrial activity, the demand for chemicals also increased, which resulted in higher international trade.

Despite a growth in domestic manufacturing capacity India remained a net importer of chemicals as capacity addition lagged demand growth and with certain chemical imports being cheaper than those produced within the country

Demand Drivers

• Manufacturers of Paper & Pulp Manufacturers: Globally paper & pulp industry is the largest consumer of caustic soda. Consumption scenario is similar in India too where the INR 500 Bn paper industry is the largest consumer of caustic soda. Approximately 12 Mntonnes of paper is estimated to have been produced in the country in the fiscal year 2015 while domestic consumption reached close to 13.3 Mntonnes per annum. Demand for paper is expected to remain strong in the coming years, which in turn would keep the demand for caustic soda high.

Exports and Imports

In FY 13-14, the total exports of chemicals and chemical products amounted to INR 1,78,567Crore as against import of INR 2,41,311 Crore. During the period FY11 to FY14, exports and imports grew at a CAGR of 19.6% and 20.3% respectively.

Demand Drivers

• Miscellaneous Industrial Applications: Caustic soda is also used in a myriad of industrial applications such as food processing, manufacturing of rayon, bleaching agent in textiles, water treatment, rubber recycling, and synthesis of certain pharmaceutical compounds. Consequently prevailing slowdown in industrial activity in the country has impacted demand for caustic soda in the country.

Exports and Imports

The import of chemicals and chemical products has registered an inconsistent growth trend over the period FY11 to FY14. This volatility was on account for sudden surge in import of sulphuric acid in the fiscal year 2012. Higher import of sulphuric acid could be partly attributed to higher demand from phosphoric fertilizer manufacturers, which form the largest consumers of sulphuric acid.

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