 "Chemical firms to gain on China norms")
India stands to gain from the strict implementation of environmental norms and safety standards on Chinese firms, which resulted in the closure of several unorganised and small units in that country.
Over the past decade, China saw blind industrial expansion, led by government facilitation and easy financing. This, coupled with the country’s lax regulations, contributed to serious environmental problems. To crack down on polluters, the Chinese Ministry of Environmental Protection enforced strict penalties with effect from January 2015. This resulted in numerous plant shutdowns and softening of the global leader’s exports.
As a consequence, import of speciality chemicals from China to India has declined. Besides, Indian manufacturers have started steadily capturing markets in China and in other markets.
According to industry sources, this opportunity has come India’s way after many decades as the cost of production of India’s specialty chemicals works out to 10-15 per cent lower than that in China after investment in environmental protection.
Seya is planning to invest Rs 600-700 crore over the next two years to increase its existing production capacity.
“About a third of our proposed investment would be met through internal accruals, while the remaining would be funded through equity and term loans as we have enough room to expand our loan book position,” said Amrit Rajani, chief operating officer, Seya Industries.
The other companies in specialty chemicals manufacturing have also proposed huge investment to expand capacity. After investing Rs 738 crore for three years ending 2014, Aarti Industries plans to invest additional capital expenditure of Rs 300 crore in the next two years.
The $25-billion Indian specialty chemicals sector is growing at 12 per cent annually despite economic slowdown in global markets. The sector is now expected to achieve $33.2 billion by 2019. Specialty chemicals find application across various industries and their growth is driven by exports as well as domestic consumption.
Traditionally, low-cost labour and raw material availability have been key success factors for Indian companies. However, factors such as product innovation, branding and distribution are becoming increasingly important.
“The specialty chemicals market is witnessing tightening import norms in developed nations due to environmental concerns. This is making it difficult for smaller players to stay cost competitive and compliant. The world is also seeing a shift in production from the west to Asia. Multinational companies are focusing on Asia thanks to lower cost of production, availability of low-cost skilled manpower and increasingly stringent environmental regulations in their home markets,” HDFC Securities said in a recent report. “Under the new policy framework, China is expected to cleanse its environment by shutting down or shifting 1,000 plants to a ‘green belt’. While China saw softer exports in 2015, we expect more of the same in 2016,” Surya Patra, an analyst with PhillipCapital. Over the past five years, the Indian specialty chemicals market saw faster growth (13 per cent annual average) against global growth of around seven per cent. More than exports, steadily rising local demand supported its growth momentum. “We expect India to emerge as a strategic alternate source for manufacturing of speciality chemicals for multi-national companies. The implementation of new environmental laws in China has already caused a decline in its chemicals exports and the trend is likely to sustain in 2016-17. The emerging trade gap due to softening Chinese exports offers huge opportunities for Indian chemical players, particularly for manufacturers of polymers, dyes & pigments, textile chemicals, and agro chemicals,” said Patra.
Preet Mohan Singh, executive director of Avendus Capital, believes India is fast becoming an important manufacturing hub and exporter for speciality chemicals.
GREEN RULES
Over the past decade, China saw blind industrial expansion, led by government facilitation and easy financing. This, coupled with the country’s lax regulations, contributed to serious environmental problems. To crack down on polluters, the Chinese Ministry of Environmental Protection enforced strict penalties with effect from January 2015. This resulted in numerous plant shutdowns and softening of the global leader’s exports.
As a consequence, import of speciality chemicals from China to India has declined. Besides, Indian manufacturers have started steadily capturing markets in China and in other markets.
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“There has been a phenomenal change in the structural dynamics of Indian speciality chemicals industry over the past year. Until a year ago, India was not having the extra edge in speciality chemicals compared to China. But now, with more stringent environment control regulations being implemented in China, it is no more has the extra edge. We have started exporting to China as Chinese manufacturers have lost the price advantages they used to enjoy till a year ago in the world of specialty chemicals market,” said Ashok G Rajani, chairman and managing director, Seya Industries Ltd, a specialty chemicals manufacturer based in Mumbai.
According to industry sources, this opportunity has come India’s way after many decades as the cost of production of India’s specialty chemicals works out to 10-15 per cent lower than that in China after investment in environmental protection.
Seya is planning to invest Rs 600-700 crore over the next two years to increase its existing production capacity.
“About a third of our proposed investment would be met through internal accruals, while the remaining would be funded through equity and term loans as we have enough room to expand our loan book position,” said Amrit Rajani, chief operating officer, Seya Industries.
The other companies in specialty chemicals manufacturing have also proposed huge investment to expand capacity. After investing Rs 738 crore for three years ending 2014, Aarti Industries plans to invest additional capital expenditure of Rs 300 crore in the next two years.
The $25-billion Indian specialty chemicals sector is growing at 12 per cent annually despite economic slowdown in global markets. The sector is now expected to achieve $33.2 billion by 2019. Specialty chemicals find application across various industries and their growth is driven by exports as well as domestic consumption.
Traditionally, low-cost labour and raw material availability have been key success factors for Indian companies. However, factors such as product innovation, branding and distribution are becoming increasingly important.
“The specialty chemicals market is witnessing tightening import norms in developed nations due to environmental concerns. This is making it difficult for smaller players to stay cost competitive and compliant. The world is also seeing a shift in production from the west to Asia. Multinational companies are focusing on Asia thanks to lower cost of production, availability of low-cost skilled manpower and increasingly stringent environmental regulations in their home markets,” HDFC Securities said in a recent report. “Under the new policy framework, China is expected to cleanse its environment by shutting down or shifting 1,000 plants to a ‘green belt’. While China saw softer exports in 2015, we expect more of the same in 2016,” Surya Patra, an analyst with PhillipCapital. Over the past five years, the Indian specialty chemicals market saw faster growth (13 per cent annual average) against global growth of around seven per cent. More than exports, steadily rising local demand supported its growth momentum. “We expect India to emerge as a strategic alternate source for manufacturing of speciality chemicals for multi-national companies. The implementation of new environmental laws in China has already caused a decline in its chemicals exports and the trend is likely to sustain in 2016-17. The emerging trade gap due to softening Chinese exports offers huge opportunities for Indian chemical players, particularly for manufacturers of polymers, dyes & pigments, textile chemicals, and agro chemicals,” said Patra.
Preet Mohan Singh, executive director of Avendus Capital, believes India is fast becoming an important manufacturing hub and exporter for speciality chemicals.
GREEN RULES
- India stands to gain from strict implementation of environmental norms and safety standards on Chinese firms, which resulted in the closure of several unorganised and small units in that country
- Over the past decade, China saw blind industrial expansion, led by govt facilitation and easy financing