Page 173 - CW E-Magazine (19-3-2024)

ICC Conference 2024

Mr. Goyal pointed out that in terms tal and analytics-based performance
of returns to shareholder, the Indian improvement.
chemical industry was a standout per- Internationalisation and becoming
former during the period from 2014 truly global: In a macro environ-
to 2023 – giving 20 percent annual ment of stalling global demand,
growth, compared to the global average companies could still seek out new
of 6 percent. This, however, reduced value pools. Towards this, they
dramatically from 2020 to 2023, even could build or acquire a suite of
though it continued to be better than institutional capabilities such as global
most of the world. business development, customer
access channels, local legal entities,
“During the 2017-2020 period, we supply chain infrastructure, applica-
had revenue CAGR, but a lot of people tion development setups and deep
were focusing on margins. In 2020-23 regional regulatory understanding.
period, we didn’t see an increase in Accelerating innovation: As they

margins at all, as a lot of people had globalise, Indian chemical com-
focused on growth with investment in panies could focus on both appli- Mr. Suyog Kotecha
capex. One of the observations we made cation-based innovation and new and vulnerabilities are still very high,
was the emphasis that Indian compa- product development, particularly especially for sectors of interest to the
nies had on functional excellence, import substitution. chemical industry like consumption of
ensuring they are on the cutting edge of Sustainability as a dual play – goods, real estate and infrastructure in

optimising processes using analytics, defence and offense: As the industry the US and China, and downtrend in
etc., had dipped dramatically,” he said. accelerates towards decarbonisation internation trade, among other factors.
to meet stricter regulatory
Speaking about the effects of global requirements and changing customer Another factor that has seriously
headwinds on the Indian industry, expectations, companies could pro- impacted the global chemical industry
Mr. Goyal pointed to stalling demand actively develop an offense play is the capacity build-up undertaken by
growth in major export markets. “The where they build green alternatives China across the chemical industry vale
Indian chemical industry already had a based on green feedstock and for- chains.
huge trade deficit, and this deficit grew mulations, while also investing in
in the last 3-4 years. While we were bio-based opportunities. “China has accounted for around
getting excited about exporting more, Deepening and globalising their 60-70% of the incremental capa-

we actually were not. The industry saw talent pool: Companies could equip city built up globally in last five years
degrowth in exports – even for specia- themselves with the right skill set from 2018 to 2023. When such mas-
lity chemicals, while overall imports and capabilities across functions sive capacity expansions happen in the
went up,” he said. such as research and development, value chain, coupled with practically
technical sales, and shop-floor ope- nil or limited demand growth, there is
Dwelling on the agrochemicals rations. tremendous pressure on the operating
industry, Mr. Goyal pointed to the rates with rates falling to 65-70%. For
very significant agrochemical capacity Such priorities could help shape the bulk chemical/petrochemical produ-
increases in China through the COVID future of the Indian chemical industry cers, these rates are a death knell from
period, which is now impacting margins. and potentially meet the ambition of a a margin point of view. You don’t get
$1-trillion chemicals market by 2040, reinvestment margins at these kind of
As the chemical industry steps up he concluded. operating rates. The operating rates
to find its footing in a fast-changing are unlikely to go back to 85% level in
world, Mr. Goyal advised companies to Industry margins: lower for longer the 2026-27 timeframe,” he cautioned,
sharpen strategies by focussing on key Mr. Suyog Kotecha, President, and pondered if the cyclical trends
areas like: Strategy and New business, Petrochemi- historically seen in the chemical industry
Building functional excellence: cals, Reliance Industries Ltd., noted would fundamentally change with longer
Indian chemical companies can build that in spite of the relative resilience of periods of lower margins becoming the
this muscle, especially through digi- the global economy, the underlying risk “new normal”.

Chemical Weekly March 19, 2024 173

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