The Indian chemical industry is preparing to capture a larger share of the global market as China grapples with unused production capacity, which is expected to stabilise chemical prices, according to a recent report by Axis Capital. With the global speciality chemicals sector projected to grow at a compound annual growth rate (CAGR) of 4%, India’s chemical industry is set to outpace this trend, with anticipated growth between 15-20% CAGR from 2022 to 2030. This rapid expansion is driven by ongoing capacity development, increased research and development (R&D) investments, and strategic market positioning.

Currently, China dominates the global chemical market, accounting for over 40%, while the U.S. and European Union contribute 13-15% each. Although India’s market share remains modest at around 4%, the nation is poised for substantial growth as international supply chains diversify away from China. This shift offers a significant opportunity for Indian firms to play a larger role in the global chemical supply chain, particularly as European companies face high costs and many look to reduce their dependence on China.

In recent years, India’s top 20 chemical companies, across both speciality and bulk segments, have significantly ramped up their capital expenditures (capex). Between FY12-15, these companies invested an average of Rs 33 billion annually. This figure increased to Rs 70 billion during FY19-21 and further surged to Rs 116 billion in FY22-24, with the FY24 capex almost matching the cumulative investments made during FY12-15. This aggressive expansion has been funded largely through internal accruals, ensuring that balance sheets remain stable and working capital is efficiently managed.

This surge in investment has also been reflected in the growth of the industry’s gross block, which saw a 21-23% CAGR between FY22-24, compared to 10-15% CAGR in the FY12-18 period. Speciality chemical companies, in particular, have nearly doubled their gross block between FY20-24, benefiting from higher global commodity prices and increased asset turnover.

As global supply chains continue to de-risk and shift, Indian chemical firms are capitalising on this trend by securing contracts from international innovators, strengthening their R&D capabilities, and expanding into diverse product offerings. These companies are embracing new chemistries, process innovations, and cost optimisation strategies, all of which are essential for maintaining competitive positioning in the face of intensifying global competition.

While China is focusing on producing value-added chemical products for sectors such as electric vehicle batteries, solar cells, and semiconductors, Indian companies are leveraging their niche offerings and backward-integrated operations. This positions them to capture market share from China and Europe, driven by higher production volumes, innovative processes, and the introduction of new products.

The Indian chemical industry’s ability to innovate and optimise costs will be crucial in navigating the evolving global landscape, ensuring that the sector remains a key player in the global market.