Address pain points to tap specialty chemicals opportunity, says Experts

While the market offers highly lucrative growth, high capital cost is expected to be a key challenge

Slowly yet steadily, the Indian specialty chemicals making strides globally, thanks to the growing domestic demand, higher realizations and better exports. With many reports projecting its export growth around 17 -18%, and domestic demand at 20%, various stakeholders are expecting huge opportunities in the near future.

While industry experts vouch for the emerging opportunities and growth potential, they are equally concerned about the consistent challenges that remain unaddressed.

“The strict regulations for synthetic chemicals are expected to work favorably for biochemicals growth. The incentives and subsidies introduced by various governments are likely to also positively impact the growth of biochemicals. Policies such as a Renewable Chemical Act in 2017, India's biofuel program in the year 2018 will actually drive the demand for biochemicals,” says Dr. Sangeeta Srivastava, Executive Director, Godavari Biorefineries.

Dr. Srivastava spoke at the e-conference on "Specialty Chemicals: Growing Share of India in Global Market" organized by Indian Chemical News (ICN) on April 28, 2022.

"Historically, the growth of bio-based chemicals has been very slow, reason being unavailability of raw material at the right place at the right price. Also, there are different economies of scale when these are compared with fossil based chemicals. Third is the lack of policies which also holds back the transition towards bio based chemicals. With few players in India, the concept of bio-refining is still in early stage. The issues such as raw material availability, feasibility of the product supply chain, scalability of various model are hampering the development at commercial scale. In order to meet the growing demand for biochemicals, more projects need to be commercialized and significant investment be made into R&D. While the market offers highly lucrative growth, high capital cost is expected to be a key challenge," says Dr. Srivastava while highlighting the pain points.

"If you are into bulk chemicals, the availability and storage is a challenge. The delay caused by unavailability of global containers and higher freight cost is really cause of concern. Owing to the current geopolitical condition, we don't know when the situation will change but we are facing shrinking margins and increase in production cost. While we aim grow, the lack of basic support system holds us back. The highly congested highways, and shortage of train drivers are few examples. Probably we need to look at how do we kind of convert these challenges into the opportunities," she adds.

“If Indian businesses get into it, they can actually do it. India Glycol is one such example which grew leaps and bounds since 1989 to become one of the the largest manufacturer of bio based surfactant," says Prof. Dr. R. K. Khandal, President - R&D, India Glycols.

Bullish about India's role in specialty chemicals, Dr. Khandal adds, "India is not going to be just an alternative but a leading supplier of specialty chemicals in the world and this is this is writing is on the wall. Only thing is we need to bring focus now. Unfortunately, we don’t see any mention of term, ‘specialty chemicals’ in the annual report of Ministry of Chemicals and Fertilizers. There is no mention of renewable chemicals, bio-based chemicals or specialty chemicals. The focus has to be brought from all corners and it has to be brought from the policymakers point. We must highlight the strength of entire industry and not just few plants operated by the government in such reports. Future is going to be renewable chemicals and chemicals from waste. Our company has taken a lead on purple carbon and shown that we are much ahead of any other company in the world. We have produced purple surfactant which is used to produce fibers and new generation detergents."

"The first major opportunity came to Indian manufacturers in 2008 when they were approached for manufacturing of specialty chemicals as the China was shutting down industries while preparing for the Beijing Olympics. This is when the Europeans and American companies gave us some share of the business given to China. Most of the companies couldn't take the advantage due to the Capex requirements," says Shekhar Khanolkar, Executive Director & CEO Chemicals, DCM Shriram.

Emphasizing on coming out of old mindsets, Khanolkar says, "There are notions in India that manufacturing of specialty chemicals has to be small scale.  We are fine with producing 300 to 500 tons in a year but for the same products, China make 5000 tons in a year. The feeling that if we produce more then it becomes commoditized but that is a wrong way of looking at it. What China does is that it takes the advantage to become more very cost efficient producers. One needs to differentiate between marketing approach and manufacturing approach. In the marketing approach, one needs to inform customers the benefits of this particular product and how it can help them into getting the division's properties but the manufacturing is for using the scale. That is where India has the potential to become a world leader in many of these chemicals. Good thing is that in last couple of years we are seeing a number of companies investing big  Capex and trying to reach those commercial levels where they can be the top three or top four global producers. We need to invest more, use the kind of skill advantage, be cost conscious. use different processes and different catalysts to optimize the processes. We need to move from development R&D to innovation R&D. We need to become a scalable and tap the opportunities that we got in last couple of years. We should be able to cash on as the Indian speciality industry,”

"Sustainability is going to play a very critical role in the success of this segment but need to define the specialty chemical chemistry or chemicals in a right way," says Dr. Alok Khullar, Vice President - R&D, Hindusthan Speciality Chemicals. 

"While we should take forward the bio-based chemicals as future growth perspective, we must remember that in most of the industries specialty chemicals are defined in a very different way. They are considered to be low volume, high value products. But if you see some of the molecules available in the market which are affecting the business on day to day basis. Be it polymer or agrochemical industry, you find a lot of molecules which are non bio based but still they are having a big impact on the productivity on the sales and marketing of big players in the industry. I mean over some of the bio based polyamide, they're making their impact. So we have to come out of this mindset that specialty chemicals are only low volume and high value products. These are the products which can have wide variety of effects and can have multiple application in different kind of industries. So we need to see this whole segment in a very holistic way," Dr Khullar adds.

"In terms of future prospects, I am sure about big opportunities for specialty chemicals, especially with the growth in electronic vehicles, wind energy, electronics happening, a lot of bio based molecules are replacing conventional petrochemical based like glycols or the phenols. Seeing the potential of the Indian scientists, I see a lot of opportunities here in this segment," he adds.

Exponential growth in business due to green China project, large population, and export demand has shifted the focus to Asia Pacific. The emergence of Gujarat and Maharashtra as the favorite zones of growth for the chemical industry, increased focus on R&D to bring in new technologies, skilled manpower with world class engineering and R&D talent. All these factors combined together drive the growth. The specialty chemicals market in India is expected to grow at a CAGR of 12.4% from US$ 32 billion in 2019 to an estimated U$ 64 billion by 2025. 

Explaining how his company is playing a critical role in helping chemical industry to achieve its goals, Praveen Arya, Application Engineer, Agilent Technologies says, “Ranked number one on Dow Jones Sustainability Index, Agilent is among top 100 sustainable companies globally. We have been providing complete integrated solutions to analytical challenges often faced in the laboratories on daily basis. We champion the success of our customers by providing the outcomes they need in the lab. We have a complete portfolio for the chemical and energy sectors. Agilent has three Centre of Excellence (COEs) in Mumbai, Bengaluru and Manesar. These are the state of art labs where we have latest equipment to provide the education and demonstration to our customers. More than that we are developing key laboratory solutions at these locations. We also collaborate with industry to come up with various solutions to the chemical related challenges.

"The specialty chemicals include dyes and pigments, leather chemicals, construction chemicals, personal care ingredients. For all these different segments, we have the complete analytical solutions for testing purity and quality assurance of compounds from insecticides, fungicides, fertilizers and polymers. GC and GC-MS technologies from Agilent are being used for analysis of additives and dyes and surfactants and different kinds of stability of formulated products. Another important example is the testing of the hand sanitizers for ethanol and iso-propanol which is in demand these days. We are also preparing well for the upcoming India REACH regulation whenever it comes. We are working on the solutions and have already optimized the methods for the analysis for all the major compounds," Arya adds.