Brief overview of Specialty Chemical Sector

Specialty chemicals comprise high-value, low-volume chemicals that are recognized for their performance-enhancing end-use applications across several verticals. These chemical products are sold based on specific requirements, rather than on their composition, driving a higher degree of value addition across the final products. Typically, specialty chemicals find significant usage in agrochemicals, automobiles, aviation, personal care products, polymer additives, water chemicals, textiles, construction chemicals, surfactants, flavours and fragrances, and dyes and pigments.

The global chemicals market stood at about $3.7 trillion in 2017 comprising basic chemicals, industrial gases, petrochemicals, polymers and specialty chemicals. Agrochemicals dominated the specialty chemicals revenue pie, accounting for 21% in 2017, with increasing applications in fertilizers, herbicides, insecticides and pesticides. The polymers and plastic additives segments comprised the second-largest revenue share at 12-14%.

Some key usage areas for Specialty Chemicals under various categories are -

• Agriculture -> Fertilizers -> Crop protection applications
• Polymers & Additives -> Electronics -> Automotive, aircraft & other transportation modes -> Defense Equipment
• Housing -> Chemicals for construction materials -> Sealants, coatings, paints and plastics
• Consumer Goods -> Perfumes -> Detergents -> Textiles -> Pharmaceuticals

Business Outlook of Specialty Chemical in India

Evolution of the Specialty Chemicals Sector Driven by innovation and expanding usage in several emerging areas, production and consumption of specialty chemicals were initially concentrated in developed regions like North America, Western Europe and Japan. 

With trade liberalization, technology transfer and rapid economic growth, the industry began proliferating in developing economies. China emerged as a leading producer of specialty chemicals, aided by easy availability of raw materials/feed stock, cheap labor and capital, sizable end-use market and government support. 

However, with increasing focus on safety, health and environment stipulations worldwide, stricter enforcement led to disruptions in the supply chain that was substantially dependent on China. Further, the relative strength of the Chinese currency, rising labor costs and reduction of government subsidies eroded the comparative advantage. The Chinese government is also promoting consolidation in the industry to shift away from high-polluting, lower-end segments. 

With supply chain disruption and uncertainty in China, global players are looking at diversifying their sourcing and India offers a strong alternative with comparable scale, technology, raw materials and supportive government policies. 

In recent years, there has been a decisive shift in the Indian specialty chemicals industry. The industry has moved away from a generic space to a knowledge-based, innovation driven industry and specialty chemicals are witnessing increasing usage in agrochemicals, pharmaceuticals, automotive and textiles.