India's Chemical Sector Grapples with Chinese Overcapacity, Weak Global Demand
India's chemical industry is under immense pressure from China's overcapacity, which floods global markets and depresses prices, and weakening demand from key Western markets across housing, automotive, and pharmaceutical sectors. A Nuvama report indicates Chinese producers operate even at losses, distorting market dynamics. Domestically, high crude, currency pressures, and policy hurdles like environmental clearance delays further compound challenges, threatening India's competitiveness and growth prospects in the global chemical landscape.
India’s chemical industry is facing a significant structural and macroeconomic squeeze, primarily due to overwhelming Chinese overcapacity, weak global demand, and elevated crude oil prices, according to a Nuvama report. China's dominance in global commodity chemical production, across products like soda ash and PVC, creates a surplus that keeps global prices under pressure. Despite subdued demand, Chinese state-backed plants continue to operate, often at a loss, distorting market dynamics and preventing meaningful recovery in prices and margins for Indian chemical companies, especially those focused on bulk and mid-value products.Adding to the pressure is weakening demand in major Western markets like Europe and the United States. A prolonged slowdown in key sectors such as housing, consumer goods, agrochemicals, pharmaceuticals, automotive, and construction has severely impacted volume growth and pricing power for Indian chemical exporters. This has specifically dampened demand for products like PVC, caustic soda, polycarbonates, intermediates, and solvents.Domestically, the sector also grapples with currency-related pressures, where rupee appreciation could erode cost competitiveness. Policy and execution gaps, highlighted by a NITI Aayog assessment, further hinder the industry. These include delays in environmental clearances, weak enforcement of anti-dumping duties, and high logistics and energy costs. Nuvama warns that without faster approvals and more supportive trade policies, India risks missing a strategic opportunity to capitalize on ongoing global supply chain realignments and Europe’s industrial decline.
