How the Chemical Industry in India may Profit Most from the Pandemic

Some time next year, when the full impact of the coronavirus is fully understood, when we have mourned the dead, counted our blessings for surviving, and sat back to appreciate what we have been through, we will discover that some have actually gained from the pandemic.

Some early winners are easy to identify.

Delivery businesses have naturally had booming sales, as housebound customers are forced to swap stone stores for ‘at the door’ collection.

A recent BBC Business report, stating that, “[Amazon] Sales in the [first] quarter jumped 26% year-on-year and the firm said they could rise another 28% in the next.” With the company’s boss, Jeff Bezos, quoted as saying, “If you're a shareowner in Amazon, you may want to take a seat because we're not thinking small.”

While most sectors look on at such figures with envy, the chemical industry, while certain to take a hit from any economic downturn, seems likely to perform better than others.

Naturally, sales of disinfectants and hand sanitisers have boosted specific chemical producers, while others, such as those supplying the automobile industry, will take more time to recover.

But perhaps, the biggest level of optimism should be reserved for the chemical industry in India which seems best placed to survive the COVID storm.

A brief glance around the world, shows where coronavirus has hit hardest and the state of the economy and chemical industry and how ready it is for recovery.

America and Russia (at the time of writing) have some of the highest numbers of cases per capita without yet reaching the top of their curves. Their chemical industries, alongside those in the Middle East, have also lost their petrochemical price advantage with the dramatic fall in the value of oil.

Belief in China as a stable supplier of raw materials has been damaged and will take years to recover. As a recent headline in the industry journal Plastics Today, asks, “Is American Manufacturing Falling Out of Love with China?”

Meanwhile in the EU, where economic growth has been stagnating since the financial crisis of 2008, the death toll among its ageing population is disproportionately high (although crucially not in Germany). Furthermore, as soon as the economic lockdown is lifted, the economy will still need to brace itself for the upcoming withdrawal of the UK from the EU trading bloc.  

In India however, the position is not so gloomy, with many investors believing that the chemicals industry there may do well.

“Despite the Covid-19-induced shutdown, one sector that remains resilient in the stock market is chemicals,” states the Indian national newspaper The Business Line. Adding that, “Shares of most companies from the sector have witnessed a turnaround in the last few days ― after an initial blip due to the bearish sentiments in the global and domestic markets ― as analysts expect a promising future.”

Those analysts are not alone. As according to Ambit Capital Research, “Indian chemicals players will benefit from the expanding specialty chemicals market globally led by growing new applications alongside manufacturing shifts from China ― which has been battered by reliability and transparency woes.”

Furthermore, a recent report by chemical industry consultants at McKinsey & Sons, supports the positive feeling emerging in the Indian industrial chemical sector. Stating that, “A long-term perspective indicates that India has averaged an annual GDP growth of 7 percent for the last 30 years. The country is also working on becoming a $5 trillion economy. This long-term optimistic scenario bodes well for chemical companies, especially in light of a long investment cycle. Chemical companies can also benefit from rising domestic demand in chemical end-use sectorsIndia’s attractiveness as a manufacturing destination, and its improved ease of doing business.”

As such, India may be well placed to reap the benefits of a damaged chemical supply chain when business returns to normal. The report stating that, “The chemical industry already contributes significantly to India’s trade volumeCapturing emerging opportunities in the near term could make a positive difference to India’s chemical companies and to the industry overall.”

Of course, like other countries, the Indian economy has been hurt by the lockdown, but analysis of the economic data as well as information on the impact of COVID-19 shows that the chemical industry there is well placed for a speedy recovery.

Periods of business turmoil will always produce winners and losers, and while it may seem harsh to think of success in a time of so much fear, uncertainty, and even grief, the world keeps turning and coronavirus will pass.

It therefore makes good business sense to be ready for the next stage. For the chemical industry that stage may be found in India.