Coronavirus may force Indian petrochemical sector to source raw material from Europe

Coronavirus may force Indian petrochemical sector to source raw material from Europe
Published: 3 March 2020 - 7 a.m.
By: Martin Menachery

India's petrochemical sector may have to look to new geographies to import raw material and intermediaries if coronavirus continues to impact China.

As a direct result, the cost of imports and production could rise in the coming months.

India depends on China for between 10% and 40% of its petrochemical supplies depending on the industry, said Indian Chemical Council officials.

"The supply chains are drying up so we could see an impact in the next few months. A wide variety of raw material is imported from China and it is not possible to quickly switch around for alternative sources. Also, cost-wise China used to be the most competitive. Some people are seeing cost increases that have to be absorbed and passed down the chain," Sudhir Shenoy, country president and CEO, Dow Chemical International Private Ltd, India, told Indian finance daily Livemint.

India's share in global chemical trade by valued at 3%. Chemicals form a significant part of the overall trade flow in India and ranks fourth in imports, after mineral fuels and oils, precious stones and metals, and electrical machinery.

Petrochemicals are the largest category of India's chemical imports by value at 54%.

"If you go through dyestuff, the main raw material is coming from China. Now the inventory is sold off and within a month if we cannot get this material, there will be shortage of reactive dyes and there is no other destination that we can source it from," Jayantibhai Patel, president, Alkali Manufacturers Association of India told LiveMint.

However, companies involved in the production of rubber chemicals, graphite electrodes, carbon black, dyes and pigments may benefit from the current situation as they may see an uptick in demand because of a fall in imports from China.

The domestic chemical industry, led by the Indian Chemical Council (ICC), has set a goal of doubling turnover from the current $150bn to $300bn by 2025, provided the government extends its support to the proposed infrastructure and policy changes.

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