the future of chemical products industries in India

Imports dominate the international trade of Indian chemical industry

In fact, since FY03, imports have accounted for about 68% of the total international trade. In fiscal year 2008, the chemical industry exported about 3.4 million metric tons of major chemicals and imported 7.4 million tons. Saudi Arabia and China are the largest import and export destinations, respectively. Due to attractive incentives for Chinese chemical producers, their products are relatively cheap in the global market, which brings fierce competition to Indian chemical companies. In fiscal year 3-08, the import of organic chemicals was dominant, accounting for about 57% of the import on average.

In fiscal year 2008, organic chemical products accounted for more than 60% of the total import volume (1.2 million tons) due to the strong domestic demand of end-user industries such as plastics and petrochemical. These industries have maintained a healthy growth in the past few years. However, due to the lack of technology, domestic enterprises have been unable to meet the growing domestic demand. As a result, the production level of organic chemicals has been stagnant, although the production capacity of organic chemicals has been increasing since fiscal year 2004.

The gloomy export prospects are aimed at curbing anti-dumping activities

The export performance of the chemical industry was weak and had been on a downward trend after fiscal year 05. In fiscal year 2008, exports accounted for about 7% of total production. The main export destinations of the chemical industry are the United States, China, the United Arab Emirates and the United Kingdom.

In terms of the composition of export products, dyes and dyestuffs account for about 1% of the total output, which has been in the leading position since fiscal year 2003, accounting for about 27%. Given its end-user industries – textiles, plastics, leather and food – the industry offers good opportunities for international trade.

In addition to dyes and dyes, alkalized products and inorganic chemical products also constitute an important part of the total export volume. The increasing demand for soda ash in glass and detergent industries has promoted the export of alkalized chemicals. However, the export of alkali metals and inorganic chemicals continued to decline. Compared with fiscal year 2006, the export of alkali metals and inorganic chemicals decreased by 69% and 20% respectively.

The industry will continue to be affected by anti-dumping activities of China and other countries. Export incentives to producers in some countries have resulted in oversupply in the global market, affecting domestic players, who then seek further fiscal incentives from the government. In addition, strict global environmental regulations continue to hinder domestic enterprises from obtaining export opportunities. Recently, the government has imposed a 20% protection tariff on soda ash. China is also considering imposing tariffs on affected chemicals. Although this is a short-term measure, it will bring some relief to export enterprises in the current economic slowdown.

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