Speciality stocks continue to rise on higher demand and lower supply

The Indian speciality chemicals industry is expected to deliver a compound annual growth rate (CAGR) of 12.4 per cent over the next five years

Demand for speciality chemicals has continued to rise regularly in the past one year, which has led to increase in the prices of these chemicals. The easing of lockdown restrictions around the world has led to improvement in the outlook for the sector.  

The winter storm disrupted chemical supplies from Texas, Louisiana and other parts of the US and the rising crude prices, thereafter, also aided in the surge in of the prices. Global customers are looking to decrease their dependence on China which has benefitted the Indian manufacturers. 

The recent spike in covid-19 cases in South China has led to strict containment measures which have impacted port movement adding to the supply crunches. Analysts believe the price increases in June for most of the chemical products were only in single digits, but continuing logistics issues are going to push the prices northward in the coming months. 

Major Price reaction was seen in chemicals such as butadiene, ammonia and benzene. Some other chemicals such as acetonitrile, aniline and acetone have also seen normalizations in prices. 

Adding to this, Motilal Oswal Financial Services Ltd (MOFS) believe that the Indian speciality chemicals industry is expected to deliver a compound annual growth rate (CAGR) of 12.4 per cent over the next five years, on a higher base thus reaching $64 billion by calendar year 2025, which is double the current level. 

Apart from the global factors mentioned above, India is also being supported by strong domestic consumption being led by a young population, favorable labor costs and government impetus.