Editorial January 2022 Chemical Industry Outlook 2022
15 Jan 2022
The government has started various initiatives such as mandating BIS-like certification for imported chemicals to prevent dumping of cheap and substandard chemicals into the country. The Indian government recognises chemical industry as a key growth element and forecast to increase share of the chemical sector to ~25% of the GDP in the manufacturing sector by 2025.
- Under the Union Budget 2021-22, the government allocated Rs. 233.14 crore (US$ 32.2 million) to the Department of Chemicals and Petrochemicals. The Government of India is considering launching a production linked incentive (PLI) scheme in the chemical sector to boost domestic manufacturing and exports.
- A 2034 vision for the chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector. The government plans to implement production-link incentive system with 10-20% output incentives for the agrochemical sector; to create an end-toend manufacturing ecosystem through the growth of clusters.
- In October 2020, the government urged players in the agrochemicals industry to come out with new molecules of global standards for the farmers' benefit, while CropLife India, the industry body, pitched for stable policies and regulatory regimes to boost growth in the sector.
- 100% FDI is allowed under the automatic route in the chemicals sector with few exceptions that include hazardous chemicals. Total FDI inflow in the chemicals (other than fertilisers) sector reached US$ 18.69 billion between April 2000 and June 2021.
- The government has proposed several incentives for setting up a sourcing or manufacturing platform within an Indian SEZ: - Effective April 1, 2020, 100% Income Tax exemption on export income for SEZ units for the first five years, 50% for the next five years thereafter and 50% of the ploughed back export profit for next five years. - Single window clearance for central and state-level approvals. - Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units.
- In December 2020, the PCPIR policy is being completely redesigned. Under the new PCPIR Policy 2020-35, a combined investment of Rs. 10 lakh crore (US$ 142 billion) is targeted by 2025, Rs. 15 lakh crore (US$ 213 billion) by 2030 and Rs. 20 lakh crore (US$ 284 billion) by 2035 in all PCPIRs across the country. The four PCPIRs are expected to generate employment for ~33.83 lakh people. ~3.50 lakh persons have been
- employed in direct and indirect activities related to PCPIRs by the end of 2020.
Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. India accounts for ~16% of the world production of dyestuffs and dye intermediates. Indian colorants industry has emerged as a key player with a global market share of ~15%. The country’s chemicals industry is de-licensed, except for few hazardous chemicals. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals).
The US chemical industry is poised for a strong recovery in 2022 as economies reopen and restrictions are lifted, which should drive up plant utilization rates that were hit hard by the pandemic. US chemical volumes are expected to grow around 1.5% in 2021 and 3.0% in 2022, while shipments will likely increase by 8.0% in 2021 and 2022, following a 13.5% decline in 2020. US chemical exports are also expected to grow significantly as major economies reopen and import demand in partner economies improves.
How big is the global chemical industry?
The production of chemicals involves converting raw materials such as fossil fuels, water, minerals, metals, and so on, into tens of thousands of different products that are central to modern life as we know it. The total revenue of the global chemical industry is estimated to be four trillion U.S. dollars.
Market Growth Sectors:
Construction: The strength in the construction industry has been a key growth driver for chemical sales. The work from home culture has expanded the number of home sales.
Automotive: The rebound in the automotive industry is another growth driver, as auto sales are expected to cross 17 million in 2021 and 2022 despite the production constraints caused by shortages of key input materials such as semiconductor chips. Growth in the automotive sector should drive the demand for base chemicals and performance plastics in 2022.
Health and safety: As the threat from coronavirus still looms based on variants, demand for personal protective equipment such as masks, gowns, and gloves should remain high, driving ethylene and propylene sales. The industry could still pivot some of its production capacity toward the products and materials needed to combat the pandemic, such as isopropyl alcohol and ethanol. Industry players are likely to ensure a strong supply of chemicals required to produce antibacterial wipes, disinfectants, and surfactants for soaps and hand sanitizers.
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