According to the experts, the coronavirus has come up with an opportunity through low labor costs to compete with China in exports of specialty chemical.
For a long period, China has been the dominator of the specialty chemicals export market in the world, and at present, it sells about 2.7 times more than that of India.
However, some factors like the shutdown of capacities amid the outbreak, the increasing labor cost, and trade-related supply chain disruption are creating a hindrance in China’s production, which can be seen as an opportunity for Indian chemical industries.
Over the past few years, the Indian chemical industries have built up world-class capabilities and further, it has been moving up at a rapid pace.
Also, due to the increasing labor costs and environmental issues in China, there has already been a shift in production activities from China to India.
Jyoti Roy, DVP-Equity Strategist, Angel Broking, hopes an acceleration in the global trend as companies from all across the globe are diversifying their supply chain away from China after the coronavirus outbreak. Meanwhile, India can be a significant part of this opportunity with the Indian chemicals industry uniquely placed to capture global attention.
Also, Vinod Nair the Head of Research at Geojit Financial Services points out that in the last few years the Indian chemical industry is benefitted hugely from high sourcing from India by shifting from China due to regulatory restrictions for pollution, cost optimization, and diversification.
Moreover, India has a stronghold in its top three export segments mainly in –
- agrochemicals with 27 percent of India’s specialty exports,
- dyes and pigments with 19 percent, and
- intermediates for active pharmaceutical ingredients, about 18 percent.
However, India exported specialty chemicals worth $23.8 billion in the Financial Year 2019, while China exported specialty chemicals worth $173 billion, indicating that a huge opportunity lies ahead for the Indian chemical sector.