India stands to gain from the strict implementation of environmental norms and safety standards against Chinese firms that has resulted in the closure of several unorganised and small units in that country.
Over the past decade, China has seen unrestrained industrial expansion, enabled by the government and by easy financing. This, coupled with lax regulations, contributed to serious environmental violations. To crack down on polluters, the Chinese Ministry of Environmental Protection enforced strict penalties starting January 2015, leading to plant shutdowns and softening of the global leader’s exports.
“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,” said Surya Patra, an analyst with PhillipCapital.
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.
“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 no more has the extra edge,” said Ashok G Rajani, chairman and managing director, Seya Industries Ltd, a specialty chemicals manufacturer based in Mumbai.
“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,” he added.
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% lower than that in China after investment in environmental protection.
Sensing the chance, other specialty chemicals manufacturers are looking to invest large sums to increase production. Aarti Industries, for example, plans to invest about Rs 300 crore over the next two year, after having already invested Rs 738 crore in the four years ending 2014. Seya, too, is planning to invest about Rs 600-700 crore over the next two years.
The $25-billion Indian specialty chemicals sector is growing at 12% annually despite economic slowdown in global markets. The sector is now expected to be worth $33.2 billion by 2019. Specialty chemicals find applications 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 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.
Over the past five years, the Indian specialty chemicals market saw faster growth (13% annual average) against global growth of around 7%, with the momentum supported more by rising domestic demand than exports.
“We expect India to emerge as a strategic alternate source for manufacturing of speciality chemicals for multi-national companies,” said Patra. “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.”
Source :.business-standard.com
No comments:
Post a Comment