State-backed Chinese oversupply and slowing Western markets are capping prices, margins, and export growth for Indian manufacturers.
India’s chemical industry is facing a deepening structural and macroeconomic squeeze as Chinese overcapacity, elevated crude oil prices, and weak demand across major Western markets combine to weigh on profitability and growth prospects, according to a report by brokerage Nuvama.
The report warned that one of the most persistent structural challenges for Indian chemical manufacturers stems from China’s overwhelming dominance in global commodity chemical capacities. China controls a significant share of global production in key products such as soda ash, caustic soda, phenol, PVC, polycarbonates, epoxy resins, TDI, phthalic anhydride, and acetic acid.
Despite subdued demand, utilisation levels in Chinese plants remain well below optimal levels, keeping global chemical prices under sustained pressure. Nuvama noted that state-backed Chinese producers continue to operate even at losses, distorting global supply-demand dynamics and capping any meaningful recovery in prices and margins for Indian chemical companies—particularly those focused on bulk and mid-value products.
The pressure is being compounded by weakening demand in the West. Europe and the United States, which together account for a large share of India’s chemical exports, are witnessing a prolonged slowdown across housing, consumer goods, agrochemicals, pharmaceuticals, automotive, and construction-linked sectors.
This has weighed heavily on volume growth and pricing power for Indian exporters.
According to the report, the slowdown in construction has dampened demand for products such as PVC, caustic soda, and polycarbonates, while subdued activity in agrochemicals and pharmaceuticals has reduced offtake for intermediates and solvents.
Nuvama also flagged currency-related pressures, noting that any appreciation of the rupee could erode India’s cost competitiveness at a time when global chemical prices are already under strain.
Domestically, policy and execution gaps continue to challenge the sector’s ability to capitalise on global realignments. Citing a NITI Aayog assessment, the report highlighted delays in environmental clearances, weak enforcement of anti-dumping duties, and high logistics and energy costs as key impediments to competitiveness.
Without faster approvals and more supportive trade policies, Nuvama warned that India risks missing a strategic opportunity created by Europe’s ongoing industrial decline and the gradual reshaping of global supply chains.
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