Indian Chemical Distribution Sector: Imminent Growth Opportunity

Indian Chemical Distribution Sector: Imminent Growth Opportunity

The fast-growing Indian chemical industry, projected to reach 288 bln EUR by 2025 (163 bln EUR in 2019), boasts the presence of both international leaders and local champions. The industry is experiencing rapid growth in both domestic and export trade. To keep pace with increasing demand while ensuring cost-efficient operations, it requires a specialized, safer, more innovative, and flexible transport system for faster and more efficient transportation.


Chemical distribution – Overview

The Indian chemical distribution sector is primarily driven by the growth of the chemical industry and government initiatives that promote local manufacturing. It is a diverse landscape, with a mix of local champions and MNCs operating within various distribution mechanisms, including direct-to-consumer, MNC distribution, sub-agents, and more. Global companies have entered and expanded in the Indian market through inorganic as well as organic growth.

Indian chemical industry – Status quo

The Indian chemical industry is one of the world's fastest-growing sector. The sub-sectors, specialty chemicals, contributing 22% of the total sector, have consistently achieved an impressive 11-12% CAGR since 2015. Additionally, inorganic chemicals, particularly fluorine chemicals, are poised for a double-digit CAGR by 2040, emphasizing the industry's long-term growth potential.

In the recent past, the Indian chemical industry has faced growth challenges. This is primarily due to two factors: 1) increased cost pressure from Chinese competition as capacity additions have occurred in the last 2-3 years, although this situation may not persist for long and 2) the industry has recently experienced continued inventory destocking in Q3, FY’ 24 by global companies, inflame by the onset of high global interest rates, resulting in a high cost of inventory maintenance.

However, in the long run, the Indian chemical industry is poised for growth. The industry is expected to continue gaining a share of the total market through innovation and the introduction of new molecules. Additionally, new small and medium-sized chemical companies are emerging in growing sectors.

Chemical Distribution – Growth Options

As the specialty sector continues to grow, new innovative molecules emerge, and new small- to medium-sized chemical suppliers enter the market, the demand for value-added services from distributors is increasing. These services may include support options such as applications labs, formulation expertise, and regional hubs.

MNCs could explore the transfer of mandates with their key suppliers to expand into new product segments and markets. Furthermore, the distribution landscape is largely unorganized, which could lead to industry consolidation, offering growth opportunities through acquisitions.

In conclusion, the Indian chemical distribution market offers promising prospects driven by the growth of the chemical industry and government initiatives. MNCs have opportunities to gain a competitive edge through value-added services and expanding their product segments. As the industry continues to evolve, the unorganized distribution landscape may pave the way for consolidation and growth through strategic acquisitions.

EAC has a track record of working with leading chemical companies to develop strategic partnerships and optimize supply chain in India and export markets. We offer support to both chemical and distribution companies, including product-market fit analysis, supply chain assessment, and partner screening.

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