The Indian chemical Industry is one of the largest contributors with 80,000 different chemicals and being a highly diversified market such as bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and pharmaceuticals. Bulk chemicals are the basic feedstock for chemicals.
The CAGR production of chemicals and petrochemicals during the period 2015-16 to 2019-20 was 5.74% where Alkali chemicals share accounted for 70% of total chemical production.
Alkali Industry includes bulk chemicals which acts as the basic crucial component for various industries. Caustic Soda is one of the major contributors in Alkali chemicals. Installed capacity of Caustic Soda as on FY21 was 47.63 lakh MT increased by 4.8% in FY21. Demand in FY21 dropped by 1.2% to 35.6 lakh MT, mainly on account of lockdown globally owing to the pandemic, this also had an impact on the realization. But as we witnessed the lockdowns being lifted, all industries began functioning at normal capacity in FY22, demand for the same has increased drastically and because of which the realization has also improved.
Caustic soda is used in various industries like pulp & paper, alumina, textiles, organics, inorganics, soaps & detergents, pharmaceuticals, dye & Inks, and various other sectors. The growth in the demand for Caustic soda can be attributed to the GDP growth of any economy and similar logic applies to other products in the alkali industry.
There are various market drivers that exist for the alkali industry to grow substantially. To start with, post the pandemic, all the governments have started spending on infrastructure to generate commendable employment opportunities, which forms the crux for any economy to grow. Caustic soda is majorly consumed by the Alumina industry which is extensively used in the infrastructure sector. Also, several opportunities in value addition on co-products are in the pipeline to maintain sustainable growth.
I believe infrastructure spending lasts for around 3 to 4 years and hence owing to this the demand for Caustic soda has substantially increased and this would remain the case for years to come.
India is an economy with a massive population and considering the income level of people that has improved and expected to improve further with growth in overall economy, demand for all consumption items is expected to grow drastically. This is directly proportional to the demand for the chemical sector. Over and above this, the Government of India is highly focused for the manufacturing segment to grow in India and for that, it has announced PLI schemes for various industries. Also, these new manufacturing facilities will generate employment which will again increase demand for consumption items. So it is a favorable cycle leading to new capacities being easily absorbed by the growing demand.
Also, over and above the demands in India, globally also many countries are looking for a substitute over China for sourcing; this has resulted in various investments coming in India to set up new manufacturing facilities leading to a boost in demand. Also, considering the current issue of logistics globally, domestic companies are preferring to source the raw material within India and that is visible in exports being greater than imports.
Considering the above observations, India is at a stage where the way in which growth is happening, many big facilities of Caustic soda are welcomed and this will lead to easy absorption by the increase in demand. In order to accomplish this, additional strong improvement in infrastructure is essential at various PCPIR regions and chemical hubs so there are better basic facilities to run the plant smoothly and reduction in cost in terms of logistics.
The government is undertaking relevant initiatives to promote solar and wind energy by focusing on setting up its infrastructure. The cost of electricity from this renewable energy is low and hence it will be beneficial to the alkali industry where one of the major raw materials is electricity. These policies are divided state wise and run through discoms but if there is one common policy for the nation, then, I believe this project can be accelerated and be achieved in a much faster way. Recently, the government relieved the anti-dumping duty on the import of caustic soda from four countries. Such measures only prove the growing importance of the chemical sector and its allied initiatives.
I see huge demand for alkali products in India for the foreseeable future and this will help for better realization for the companies. Also, any new capacities in this industry will be welcomed as it will be easily absorbed against the increase in demand.
Author: Maulik Patel, Chairman & Managing Director, Meghmani Finechem Limited
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