Volume of production in chemical industry positions India as third largest producer in Asianext to China and Japan, andtwelfth largest in the world.. Gujarat is the major contributor to
Trang 1C MY
EXPORT-IMPORT BANK OF INDIA
OCCASIONAL PAPER NO 117
INDIAN CHEMICAL INDUSTRY:
A SECTOR STUDY
EXIM Bank’s Occasional Paper Series is an attempt to disseminate the findings of research
studies carried out in the Bank The results of research studies can interest exporters,
policy makers, industrialists, export promotion agencies as well as researchers However,
views expressed do not necessarily reflect those of the Bank While reasonable care has
been taken to ensure authenticity of information and data, EXIM Bank accepts no
responsibility for authenticity, accuracy or completeness of such items.
© Export-Import Bank of India Published by Quest Publications
March 2007
Trang 24 Analysis of Chemical Imports by Major Countries and 56
India’s Export Markets
Annexures
2 Anti-Dumping Cases Initiated by India Against Various 75
Countries in the Chemical Sector (1992-2005)
3 MFN Applied and Bound Tariffs for Chemicals and 78
Products in Select CTHA Countries
4 List of Countries that have joined the Responsible Care Initiative 79
6 Select Foreign Acquisitions by Indian Companies in the 81
Chemical Sector
Study undertaken by:
Mr S Prahalathan, Deputy General Manager,
Research and Planning Group
Trang 3C MY
List of Tables
No.
3 Production of Select Chemical Products in Japan (2005 and 2006) 33
4 Production of Select Chemical Products in Canada (2005 and 2006) 35
5 Installed Capacity and Production of Major Basic Chemicals in India 37
6 Installed Capacity and Production of Major Basic Petrochemicals in India 39
7 Installed Capacity and Production of Major Petrochemical 39
Intermediates in India
8 CAGR of Production by Various Chemical Sectors in India 40
During 2001-02 to 2005-06
9 Estimated Size (in value) of the Chemical Industry (2005-06) 40
Trang 4C MY
List of Exhibits
2 Sales of Chemical Industry by Select Countries (2005) 23
4 Share of Chemicals in Total Merchandise Exports and 24Manufactured Exports (2005) in the World
6 Sectorwise Break-up of Anti-Dumping Cases – Initiations and 27Measures in the World (1995 – June 2006)
8 Index of Chemical Industry Production (2002=100) in USA 31
9 Comparison of Index of Industrial Production – 36Basic Chemicals, Manufacturing and General Index of
Industrial Production in India
10 Share of Major States in Production of Chemicals and 41Petrochemicals in India (2005-06)
11 Trends in India’s Export of Select Basic Chemical Products 42
12 Country-wise Export of Organic Chemicals from 43India (2005-06)
13 Country-wise Export of Inorganic Chemicals from 43India (2005-06)
14 Country-wise Export of Dyes, Pigments and Other Colouring 44Materials from India (2005-06)
15 Country-wise Export of Pesticides from India (2005-06) 45
16 Trends in Export of Petrochemicals from India 46
17 Terms of Trade in Select Chemical Sectors in India (2005-06) 46
18 Trends in India’s Import of Select Basic Chemical Products 48
19 Source Countries for India’s Basic Chemical Imports 48
21 Major Importers of Cyclical hydrocarbons (SITC Code 5112) 56and their Source Countries
22 Major Importers of Polyethylene (SITC Code 5711) and 57their Source Countries
Trang 531 Anti-Dumping Cases Initiated by India (1992 – 2005) 67
32 Possibilities of Collaboration by Chemical Industry 69
Trang 6C MY
List of Boxes
4 Major Chemical Groups and Sub-Segments Produced in India 38
Trang 7This study focusses on chemical
sub-segments such as:
❖ Basic Chemicals also known as
commodity chemicals, including
organic and inorganic
chemicals, bulk petrochemicals,
other chemical intermediates,
plastic resins, synthetic rubber,
man-made fibers, dyes and
pigments, printing inks;
❖ Specialty chemicals, also known
as performance chemicals, are
low-volume but high-value
compounds These chemicals
are derived from basic
chemicals and are sold on the
basis of their function For
example, paint, adhesives,
electronic chemicals, water
management chemicals, oilfield
chemicals, flavors and
fragrances, rubber processing
additives, paper additives,
industrial cleaners and fine
chemicals Sealants, coatings,
catalysts also come under this
category;
especially crop protection
chemicals such as pesticides
The study excludes drugs andpharmaceuticals, and fertilizers, asthey are large in size to have aseparate industry status and areappropriately positioned forexclusive studies, individually
GLOBAL SCENARIO
Global chemical production isgrowing and the growth iscontributed by the chemical industry
of developing countries Growth indemand for chemicals in developingcountries is high leading tosubstantial cross-border investment
in the chemical sector Global sales
of chemicals in the year 2005 wereestimated to be aroundUS$ 1.75 trillion USA is the singlelargest country with a share of 22%(US$ 380 billion) in world chemicalsales, followed by Japan (10% -US$ 194 billion), China (9% - US$
163 billion), Germany (7% - US$
122 billion) and France (5% - US$
90 billion) In terms of regions,Asia-Pacific tops the list with ashare of 35% in global salesfollowed by Europe (34%), NAFTA(25%) and Latin America (4%).World export of chemicals isestimated to be US$ 832 billion in
EXECUTIVE SUMMARY
Trang 82005 The share of chemicals in
world merchandise trade and global
trade of manufactures is estimated
to be 11% and 15% respectively, in
2005 The growth in world
chemicals trade has averaged out to
around 12% during the period
2000-2005 Leading chemical exporters
are Germany (11% - US$ 95 billion),
USA (11% - US$ 94 billion), France
(6% US$ 51 billion), Japan (6%
-US$ 49 billion), and China (4% - -US$
32 billion)
The joint framework agreement
for tariff harmonization in the
Uruguay Round (Chemical Tariff
Harmonisation Agreement), has led
to a substantial reduction in tariffs in
the signatory countries However, in
many countries reduction in tariff has
been substituted by increase in
non-tariff barriers Dumping of chemicals
and anti-dumping actions by
countries have become part of the
game plan of many firms / countries
Globalisation of chemical
industry has led to national markets
being supplied from an increasing
number of locations, while individual
companies have increased the
geographic scope of their operations
Chemical companies in the world are
now merging their business
processes, including their supply
chain, to reduce risks and to create
sustainable competitive advantage
The global chemical industry is
continuously working towards
reduction of environmental impact
of its activities The industry iscommitted to contribute to thesustainable development of thesociety as a whole, through its
‘Responsible Care Initiative’, and hasdeveloped systems for improvingthe health, safety and environmentalperformance of its products andprocesses
CHEMICAL INDUSTRY IN INDIA
Chemical industry is one of theoldest industries in India It isestimated that the size of Indianchemical industry is around US$
30 billion Volume of production
in chemical industry positions India
as third largest producer in Asia(next to China and Japan), andtwelfth largest in the world Theindustry, comprising both small-scale and large units (includingMNCs) produces several thousands
of products and bi-products, rangingfrom plastics and petro-chemicals
to cosmetics and toiletries Asignificant share (around one-third)
of production by chemical industry
is consumed by itself The chemicalindustry accounts for about 13%share in the manufacturing outputand around 5% in total exports ofthe country The chemical industrycontributes around 20% of nationalrevenue by way of various taxesand levies
The chemical industry producedaround 8 million metric tonnes each
of basic chemicals and basicpetrochemicals, and around
Trang 910 million metric tonnes of
petrochemical intermediaries in
2005-06
Gujarat is the major contributor
to the basic chemical as well as
petrochemical production with 54%
and 59% share in all India production,
respectively Other major states
producing basic chemicals include
Maharashtra (9%), Tamil Nadu and
Uttar Pradesh (6% each) Other major
states producing petrochemicals
include Maharashtra (18%), West
Bengal (12%), Uttar Pradesh (4%),
and Tamil Nadu (3%)
India’s export of basic chemicals
amounted to over US$ 7 billion in
2005-06 India exported US$ 4.85
billion worth of organic chemicals,
US$ 775 million worth of inorganic
chemicals, US$ 847 million worth of
tanning and colouring materials, and
US$ 649 million worth of pesticides,
in the year 2005-06 In addition, India
exported petrochemicals valued
nearly US$ 4 billion India is also an
importer of basic chemicals and the
import value amounted to over US$
8 billion in 2005-06 The
composition of India’s chemical
imports includes organic chemicals
(63%), inorganic chemicals (28%),
dyes (6%) and pesticides (3%)
China, USA and Saudi Arabia are the
leading source countries for India’s
chemical imports In addition, India
imported petrochemicals valued over
US$ 2 billion
The Indian chemical industry hasbeen receiving significant investmentintentions, including foreign directinvestment (FDI) Since August 1991,and till November 2006, chemicalindustry has received investmentproposals worth Rs.274486 crores,
a share of 11.3% in total investmentproposals received during thisperiod FDI, which is very essentialfor modern manufacturing ofchemicals, has also been flowing intothe chemical sector significantly.During the period August 1991 toOctober 2006, FDI invlows into thechemicals sector amounted toUS$ 2.2 billion, a share of around6% in total FDI inflows into thecountry
ANALYSIS OF CHEMICAL IMPORTS BY MAJOR COUNTRIES AND INDIA’S EXPORTS
Analysis has been carried out toidentify highly traded chemicals,based on the import data of worldchemicals at SITC classification 4-digit level The analysis revealedthat in the year 2005, majorchemicals traded in the worldinclude Cyclical hydrocarbons (SITCCode 5112), Polyethylene (5711),Polycarbonates (5743), Propylenepolymers (5751), Monocarboxylicacids and derivatives (5137),Acrylic hydrocarbons (5111),Acrylic monohydric alcohol (5121),Polycarboxylic acids (5138),Albuminoidal substances (5922),
Trang 10and Ether and alcohol peroxide
(5161) Analyses have been carried
out in these product groups to
know about the major importers of
each product groups, their source
countries for imports, as also India’s
exports and major export markets
The analyses revealed that EU,
USA and Japan are the leading
importing regions / countries for
these analysed product groups
These countries have been mostly
sourcing their import requirements
within the region Since many
countries in the EU are shifting their
production base to other developing
countries, India may endeavor to
attract such manufacturing
opportunities and explore
possibilities of increasing its exports
to European countries The analyses
further revealed that in some product
groups, India has been one of the
major suppliers to the world These
include insecticides (second major
supplier with 13% share),
hydrocarbons derivatives (ranked
second with 13% share), cyclic
alcohol derivatives (ranked third with
12% share), synthetic organic
dyestuffs (ranked fourth with 6%
share), synthetic brighteners (ranked
fifth with 6% share), cyclic
hydrocarbons, and fluorides (both
ranked ninth with 3% and 2% share,
respectively) India may leverage the
advancement in manufacturing
technologies in these product groups
to replicate in the production of other
products, and become a global
player, across the segments
CHALLENGES
Indian chemical sector has grown
a long way since its early days ofindependence The sector hasgrown from a small-scale sector tomulti-dimensional sector, which istaking on the challenges ofglobalization Now, Indian chemicalindustry holds a recognized position
in the global map; however, thereare few factors, which hinders thegrowth of the industry Theseinclude:
High prices of basic feed stock
Basic raw materials constitute majorportion of cost of production (30%
to 60%) in the chemical industry.Indian chemical industry either usesnatural gas or crude oil as feedstockfor manufacturing process Thefluctuations in oil prices thereforeaffect the growth projections of thefirms
SSI reservation / Fragmented nature of industry
The Indian chemical industry ishaving a fragmented structure withmore number of units in small-scalesectors spread in various parts ofthe country The installed capacities
in most of the small-scale units aresmaller as compared to globalscales The limitation in capacity
in the SSI sector put them indisadvantageous position whiletapping export opportunities withlarge volume
Trang 11Low R&D levels
The level of R&D investments in
the Indian chemical sector is low
at around 0.3% of total sales The
areas for strengthening of R&D in
chemical industry include
improvements in manufacturing
process for reduction in cost of
production, application
development to diversify demand,
and new product development
Low Level of ICT interface
The usage of information
technology in Indian chemical
industry is relatively lower, as most
of the units are in the small-scale
sector Application of information
technology in the chemical sector
is required for equipment design,
chemical engineering, and process
simulation that have helped in
reducing product and process
development time Information
technology should also be
increasingly used in the area of
R&D, especially in collaborative
research
Low Level of Brand
Development
Indian chemical producers,
excepting a few large producers,
generally sell their products as
generic products without brand
development There is also low
level of interest amongst
small-scale producers for brand
development, product development
as also market development
Low Level of Common Infrastructure
In general, due to its very nature,the chemical / petrochemicalindustry requires certain basicinfrastructure facilities, both in theprocess chain as also in the supplychain At present, each unit has tocreate specialized facilities on itsown which leads to duplication ofefforts and investment If chemicalunits are clustered in closeproximity, the required infrastructurecould be vertically integratedresulting in cost reduction
Environmental Regulations
As with other industries, thechemical industry needs to complywith regulations such asOccupational Safety and Health andProcess Safety Managementregulations Environmental safety,occupational safety and processmanagement safety can easily bemet if a firm is manufacturing largevolume of single chemical But itmay not be relatively feasible forthe firms who manufacture lowvolume and large number ofchemicals in a single plant
Dumping / Import Competition
Chemical industry is the secondlargest industry that has attractedlarge number of anti-dumpingactions in the world In India,chemicals and petrochemicalsindustry is the largest segment that
Trang 12has initiated anti-dumping
investigations during the period
1992-2005 82 anti-dumping cases
(out of 188 cases) initiated by India
fall under the category of chemicals
and petro-chemicals, during this
period
STRATEGIES
Focus on Core Competence
Chemical products trade is
increasingly getting specialised all
over the world Innovation is
increasingly becoming an important
factor to focus on core competence
and to become a leading player in
specialty products In the above
context, it is important for the
Indian chemical manufacturers to
focus on select business segments
where competitive advantage
exists
Strengthening Technological
Competence
Indian chemical industry should
strive for continually improving its
production processes and products
by investing resources in
technology development
Technological development may
be achieved by the chemical
industry at two levels In the bulk
products segment, the chemical
industry should undertake process
innovation with the objective of
reduction in cost of production In
addition, the industry needs to
invest in technological resources
that would lead to specializedproduct development
Improving Basic Management Capabilities
Indian chemical industry has a goodrecord of management expertise.This could be further leveraged withtechniques such as GoodManufacturing Practices, GoodLaboratory Practices, Total QualityManagement, Total ProductionManagement and Risk Management
Adhering to Environmental Norms
Since chemical substances are used
in manufacture of consumer itemssuch as paint, glue, insect spray,cosmetics and household cleaners,chemical producers have theresponsibility in promoting safemanagement of substances – startingfrom design in production to end-use, and their final disposal(hazardous waste) Further, in order
to garner a greater share in worldchemicals market, Indian chemicalindustry needs to address variousdevelopmental issues such assustainable chemistry, adherence tosafety and health and riskmanagement
Focus on R&D
Indian chemical industry needs tofocus on R&D in one or multipleareas While R&D remains anuniversal imperative, its purpose
Trang 13and nature varies across segments.
The basic chemical sector should
focus on process innovation and
product development and
strengthen their competitiveness
through improvements based on
performance and quality of
products Firms in knowledge based
chemical sector should focus on
R&D with the objective of
achieving product leadership and
process innovations The
petrochemical sector should focus
on application R&D, as new
applications have to be identified
to increase use and application of
polymers
Collaboration
The chemical industry needs to
enhance their collaborative efforts
in order to improve
competitiveness Collaboration
amongst players in the chemical
industry could happen both at
cluster level (for sharing of
common infrastructure) as also at
firm level (for sharing of
knowledge and technology)
Collaboration with firms across
borders for technology and
investment would also give a boost
to the industry In addition, the
players should also achieve greater
level of industry-institutional
partnership for knowledge
development and sharing
Increasing ICT interface
Chemical firms in India can gain a
lot by making their manufacturing
process IT-enabled InformationTechnology (IT) can bring a goodchange in entire process cycle fromtechnology, engineering andprocurement to manufacturing byintegrating them with businessprocesses in all these areas Thiswill eventually result in higherefficiency for the industry.Increasing use of IT to transactbusiness will also help the sector,
as most of the products in thechemical sector are commoditised
Consolidation
The new trend in chemical industry
is competing through consolidation.Chemical firms, through mergersand alliances are now achievingeconomies of scale all over theworld Consolidation helps thechemical industry in reduction ofcost in their procurement andproduction Such consolidationexercises also provide for reduction
in overheads, marketing expenses,increased efficiencies in supplychain management and enhancedpresence in various regions It isimportant for Indian chemicalindustry to consolidate theiroperations and emerge as globalwinners
Industry - Academia Linkages
For transforming ideas into newproducts, partnership betweenindustry and academia is a must.Thus, Indian chemical industryshould leverage the potential ofeducational and research institutions
Trang 14to source intellectual as well as
human capital Such linkages may
be effectively used for setting up
of in-house R&D facility or for
outsourcing R&D activities
Marketing and Promotion
Indian chemical industry should
increasingly focus on marketing and
promotion to achieve greater share
in global chemical trade The
industry may endeavour to
concentrate more on issues such
as brand building, export promotion
and market development
Setting up of Chemical Parks
or Mega Chemical Estates
In order to address the issue of
creation of common infrastructure,
the chemical industry, in association
with the Government may establish
exclusive Chemical Parks – a
concept similar to the Software /
Hardware Technology Park It is
also important to consider
establishment of exclusive Chemical
Zones on the lines of Special
Economic Zones to give a fillip to
the industry In such Parks / Zones,
the industry may be encouraged
to set up mega chemical plants
that could contribute to increased
production as well as employment
generation The Government has
already initiated policies for setting
up of integrated Petroleum,
Chemicals and Petrochemicals
Investment Regions (PCPIR)
De-reservation of Select Chemical Production
Many chemical products (eg.Potassium Permanganete, SodiumFerrocyanide, Calcium Carbide,Citric Acid, Sodium Cyanide) arestill reserved for production undersmall-scale sector However, cost-competitiveness as well astechnological compliance cannot beachieved without operating underscale economies Most of the firmsoperating at the global level arebig ones and enjoy economies ofscale De-reservation of chemicalproducts reserved for productionunder small-scale sector can be agood measure to support theglobalisation efforts of the industry
Creation of Modernization Fund
A modernization fund on the lines
of technology upgradation fundestablished for the textile sectormay be created to strengthen thetechnological competence of theindustry
Increasing Consumption Levels
of Chemicals
Per capita chemical consumption
in India is low as compared toworld standards (estimated to beone-tenth of world average).Increasing consumption level in thedomestic market would ignite theprevailing latent demand Thiscould be achieved through
Trang 15increasing applications through R&D
and enhancing the knowledge of
end consumers
OUTLOOK
Indian chemical industry has come
a long way Today, India has
significant presence in production
of basic organic and inorganic
chemicals, pesticides, paints,
dyestuffs and intermediates,
petrochemicals, fine and specialty
chemicals, cosmetic and toiletry
product segments Thus, by virtue
of its diversity, the chemical
industry bears a close correlation
not only with the quantum of
overall economic growth but also
with the contents and quality of
growth
The performance and outlook of
the chemical industry, particularly in
the context of India’s development
process, depends upon and
determines the trends in the overall
economy, as also the linkages with
the rest of the world in terms of
international trade, investment flows
and technology transfers On the
domestic front, with the reduction
in tariffs, Indian chemical companies
with strong systems and organized
operations are likely to be benefited
further Companies with competitive
advantages, like having competence
in the areas of high value added
chemicals, conforming to
international quality standards, could
translate their capabilities andestablish a dominant presence inboth international and domesticmarkets
In the years to come, variousnew avenues are likely to arise inthe Indian chemical industry likestructural shifts, strategic marketingalliances for domestic sales andexports, strategic marketing alliancewith multinationals and tradingcompanies, stricter enforcement ofgood manufacturing practices,opportunity for value addition usingcontract manufacturing or contractresearch
Use of advanced technology,strong research capabilities,backward and forward linkages anddevelopment of domestic capacity
to reduce dependence on importedraw materials are key success factorsfor Indian chemical industry Inaddition, safety, health andenvironment protection issues arebecoming important challenges forthe Indian chemical industry Indianmanufacturers are addressing suchchallenges in an organized way.The International Council ofChemical Associations (ICCA), anassociation representing 80% of theworld manufacturers of chemicalshas reiterated its support for a newround of multilateral tradenegotiations in the World TradeOrganization ICCA’s priorities
Trang 16include elimination of chemical tariffs
by the year 2010, harmonization of
anti-dumping practices, simplification
of customs procedures and full
implementation of TRIPs agreement
While the harmonization of dumping practices would benefitdeveloping countries like India, thetariff-free world would pose stiffcompetition
Trang 17anti-Chemical industry is one of the
key industries in contribution to the
world economic output and
employment The industry has
contributed around US$ 1.75 trillion
in global value of sales in 2005 The
industry provides products and
services that improve the quality life
of customers and communities.Product-lines of the chemicalindustry are used in every area oflife such as food, clothing, housing,communication, transport as well asentertainment Thus, the businesscycles of end user segmentssignificantly affect the chemicalindustry
1 INTRODUCTION
SOURCE: Adapted from Report of the Task Force on Chemical Industry,
Government of India, February 2002
Exhibit 1 END-USER SEGMENTS OF CHEMICAL INDUSTRY
Trang 18The chemical industry uses raw
materials such as gas, oil, coal, water
and minerals to produce a vast array
of products Chemical industry is also
major demand driver for other
sectors such as energy, information
technology, environmental
technology
The industry is heterogeneous
in nature with many sectors such as
organic, inorganic, dyes, paints,
pesticides and specialty chemicals
Specialty chemicals are produced in
select countries, which has advanced
technology and production skills
The chemical industry is
energy-intensive in its manufacturing process
as also in terms of usage of raw
materials While using natural gas,
natural gas liquids, oil, coal and
electricity as energy, the industry also
draws up its raw materials from such
energy sources as primary ingredient
in production The industry is one
of the largest employers (employs
over 10 million persons worldwide)
and contributes to the welfare and
employment on a global scale The
role of Research & Development
(R&D) is crucial in the chemical
industry due to the constant need
for innovation
The chemical industry isgenerally categorised into thefollowing three broad segments:
❖ Basic chemicals, also known ascommodity chemicals, includeorganic and inorganicchemicals, bulk petrochemicals,other chemical intermediates,plastic resins, synthetic rubber,man-made fibers, dyes andpigments, printing inks
❖ Specialty chemicals are volume but high-valuecompounds, and are alsoknown as performancechemicals These chemicals arederived from basic chemicalsand are sold on the basis oftheir function For example,paint, adhesives, electronicchemicals, water managementchemicals, oilfield chemicals,flavors and fragrances, rubberprocessing additives, paperadditives, industrial cleaners andfine chemicals Sealants,coatings, catalysts also comeunder this category
especially crop protectionchemicals such as pesticides
Trang 19Global sales of chemicals in the
year 2005 were estimated to be
around US$ 1.75 trillion USA is
the single largest country with a
share of 22% (US$ 380 billion) in
world chemical sales, followed by
Japan – 10% (US$ 194 billion),
China - 9% (US$ 163 billion),
Germany -7% (US$ 122 billion) and
France - 5% (US$ 90 billion)
In terms of regions, Asia-Pacific
tops the list with a share of 35% in
global sales (US$ 615 billion),
followed by Europe (34% - US$
609 billion) and NAFTA (25% - US$
450 billion) Latin American countriesaccounted for US$ 73 billion (4%) ofglobal sales in 2005
EXPORTS
According to World TradeOrganisation’s data, world export
of chemicals is estimated to beUS$ 832 billion in 2005 The share
of chemicals in global merchandisetrade and global trade ofmanufactures is estimated to be11% and 15%, respectively in 2005
2 GLOBAL SCENARIO
Exhibit 2 SALES OF CHEMICAL INDUSTRY BY SELECT COUNTRIES (2005)
SOURCE: German Chemical Industry Association; American Chemistry Council;
European Chemical Industry Council
Trang 20Export of chemicals by European
region has highest share (15.2%) in
total merchandise exports, while that
of Africa was the lowest at 3.1% in
2005 Export of chemicals by CIS
region has highest share (21%) in
total export of manufactures, while
that of Asia was the lowest at 8.9%
in 2005
The growth in world chemicalstrade has averaged out to around12% during the period 2000-2005
In terms of individual countries,leading exporters in the order of
Exhibit 3 SALES OF CHEMICAL INDUSTRY BY REGIONS (2005)
SOURCE: German Chemical Industry Association; American Chemistry Council;
European Chemical Industry Council
Exhibit 4 SHARE OF CHEMICALS IN TOTAL MERCHANDISE EXPORTS AND
MANUFACTURES EXPORTS IN THE WORLD (2005)
SOURCE: World Trade Organisation
Trang 21their share in world exports include
Germany (11% - US$ 95 billion), USA
(11% US$ 94 billion), France (6%
-US$ 51 billion), Japan (6% - -US$ 49
billion), and China (4% - US$ 32
billion) Leading importers are USA
(11.% US$ 92 billion), China (9%
-US$ 75 billion), Germany (8% - -US$
67 billion), France (5% - US$ 46
billion), UK (4.5% - 39 billion), Italy
(4% 36 billion) and Japan (3%
-US$ 30 billion)
According to World Trade
Organisation, the share of
intra-regional trade by Europe, North
America and Asia have been
significant The share of
intra-regional trade by Europe was 72%,
while that of North America and Asia
have been 40% and 65%
respectively
TRENDS IN GLOBAL CHEMICAL
INDUSTRY
World chemical production is
growing and the growth is
contributed by the chemical industry
in developing countries Growth inchemicals demand in developingcountries is also high, leading tosubstantial cross-border investment
in the chemical sector Transnationalcorporations through cross borderinvestment and production cater tothe demand growth in developingcountries Trade betweendeveloping countries is also on therise due to the increasedproduction capacity in developingcountries
The joint framework agreementfor tariff harmonization in theUruguay Round, (Chemical TariffHarmonization Agreement or CTHA),has led to a substantial reduction intariffs in the signatory countries.However, in many countries,reduction in tariff has beensubstituted by increase in non-tariffbarriers The tariffs in countries notparticipating in the CTHA are alsoremaining high Many CTHA
Exhibit 5 EXPORTS OF CHEMICAL BY REGIONS (2005)
SOURCE: International Trade Statistics – 2005; World Trade Organisation
Trang 22members are seeking for inclusion
of more chemical producing
countries under CTHA or other such
mechanisms that might bring same
tariff harmonization results
Globalisation of chemical
industry has led to national markets
being supplied from an increasing
number of locations, while individual
companies have increased the
geographic scope of their operations
Dumping of chemicals and
anti-dumping actions by countries have
become part of the game plan of
many firms / countries According
to data collated by World Trade
Organisation, during the period 1995
to June 2006, 578 anti-dumping
cases have been initiated in the
chemical sector, second largest
sector, next only to metals / metal
processing sector During the same
period, in 381 cases the membercountries have taken anti-dumpingmeasures, second largest sector with
a share of 20%
The economic transformation inthe world in the last two decadeshas altered the landscape of thetraditional chemical supply chain.Such alterations have also changedorganizational boundaries ofmultinational firms and have pushedthe frontier of information technology
as a key enabler to this businessprocess transformation Chemicalcompanies in the world are nowmerging their business processes,including their supply chain, withinformation technology to bettermanage unexpected events toreduce risks and to create asustainable competitive advantage
Box 1 CHEMICAL TARIFF HARMONISATION AGREEMENT
In the Uruguay Round, select WTO Members have agreed to harmonizetariffs on a broad range of chemical goods to promote liberalization inthis sector and to develop a more predictable and transparent globaltariff structure for this industry The result was the Chemical TariffHarmonization Agreement (CTHA), which led to a substantial reductionand harmonization of chemical tariffs in HS Chapters 28-39 Currentdiscussions involve the expansion of both product coverage andparticipation in that Agreement, although the focus continues to be onparticipation At present, CTHA members include: Australia, Bulgaria,Canada, the Czech Republic, Ecuador, Estonia, the European Union,Hong Kong, Japan, Jordan, the Republic of Korea, Mongolia, NewZealand, Norway, Panama, People’s Republic of China, Qatar, Singapore,Slovakia, Switzerland, Taiwan, the United Arab Emirates and the UnitedStates of America
SOURCE: World Trade Organisation, CEFIC
Trang 23Exhibit 6 SECTORWISE BREAK-UP OF ANTI-DUMPING CASES – INITIATIONS AND
MEASURES IN THE WORLD (1995 – JUNE 2006)
SOURCE: Exim Bank Research
SOURCE: World Trade Organisation
Exhibit 7 SURVIVAL TRIANGLE OF WORLD CHEMICAL INDUSTRY
Trang 24The chemical industry is riding
on the big wave of automation,
integration and collaboration
Technology is becoming a key
enabler in the world chemical
industry with the wake of increasing
complexity It is expected that the
demand for automation would flow
across organizational boundaries
within the enterprise
Successful chemical firms are
deploying an adaptive business
network that gives them the ability
to quickly sense and respond to
changes in the extended supply
chain Chemical firms now require
viable supply chain, with analytical
capabilities to integrate across the
enterprise and to close the loop
between planning and execution
The planning process in the
world chemical industry is becoming
more and more interactive and
demand-driven with additional
information flowing into the planning
systems directly from the customers,
suppliers and service providers
Technology has been performing as
key enabler in transforming the
chemical companies to become more
responsive and competitive without
sacrificing costs
The concept of sustainable
development is receiving a growing
recognition in the chemical industry
In order to implement sustainable
development, environmental and
safety standards have been set for
the chemical industry, which
addresses the problems of users(both intermediate and end users),
as also the production related issues(consumption of energy and energyresources as raw materials)
Some of the parameters that arebeing addressed by the chemicalindustry include:
❖ Use of scientific environmentmonitoring systems;
minimization (be it energy orenergy resources as rawmaterials) systems in aconsistent manner, with theobjective of integratingenvironmental protectionconsiderations into products andprocesses, as early as possible;
❖ Enhancing systems for plantand product safety andimproving the efficiency ofwaste disposal systems;
❖ Creating a policy for usage ofeconomically andenvironmentally optimizedmaterials and energy use with
a thrust on sound attitudetowards usage of scarceresources;
❖ Appropriate provision for use or recycling of usedsubstances and productsThe chemical industry is anenergy intensive industry; on anaverage, about 9% of total productioncosts are being incurred by theindustry due to energy use For
Trang 25re-manufacture of some chemicals, this
ratio can raise upto 60% Thus,
competitive access to energy is
necessary to the chemical industry
Since the reservoir of energy
resources is finite, their proper
management is a crucial pillar of
sustainable development The global
chemical industry is continuously
working towards reduction of
environmental impact of its activities
Perhaps, the innovation in the world
chemical industry is enabling other
industries to use resources more
efficiently with less environmentalimpact
The global chemical industry hascommitted to continuouslyimproving the health, safety andenvironmental performance of itsproducts and processes, and therebycontributes to the sustainabledevelopment of the society as awhole, through its ‘Responsible Care’initiative The Responsible Careinitiative is currently implemented
in over 50 nations with chemicalmanufacturing operations,
Box 2 MERGERS AND ACQUISITIONS IN GLOBAL CHEMICAL INDUSTRY
A study by PriceWaterHouseCoopers has estimated that over 2000 dealswere in the chemicals sector during the period January 2003 to December
2005, with a cumulative deal value of over US $ 130 billion Theseinclude 35 mega deals, with a value of US $ 1 billion and more, with anaggregate value of US $ 82.1 billion
In the year 2005 alone, number of deals witnessed by this sector was
95 with a cumulative deal value of US $ 55 billion There were 15 dealswith the deal value of US $ 1 billion or more, cumulatively accountingfor 63% (US $ 32 billion) of total deals concluded in this year
The global trends in mergers and acquisitions have indicated that most
of the chemical companies were interested in improving their marketposition in Europe and North America, but prefer to expand in Asia bymeans of investments in capacity expansion In the year 2005, AsiaPacific region witnessed 263 deals, of which China alone accounted for
112 deals, followed by Japan 63, and India 24
Majority of the deals in 2005 were in the basic chemical sector (55%),followed by specialty and fine chemicals (20%), polymers (16%) anddiversified chemicals (9%) Strategic investors played a major role inmany of the deals in the year 2005 Strategic investors have collectivelyinvested nearly US $ 38 billion (about 68% of the total value of deals)
SOURCE: PriceWaterHouseCoopers, Mergers and Acquisitions Activity in the Global
Chemicals Industry 2003-2005
Trang 26accounting for 90% of global
The chemical industry in USA has
over 15000 units and employs
around 0.9 million workers directly
The industry accounts for 6.2% of
total employment generated by the
manufacturing sector In addition, it
is estimated that around 5 million
indirect employment is created by
the chemical industry With a sales
turnover of US$ 380 billion and
the export orientation of the chemicalindustry in USA works out to 25% in
2005 The industry ranks second interms of productivity – the peremployee value added in the USchemical industry is estimated to beUS$ 200 per annum – secondamongst all manufacturing sectors
Japan
Chemical industry in Japan is thesecond largest in the world (nextonly to USA) with a turnover of US$
194 billion in 2005 The chemicalindustry in Japan consists of over
4000 units, employing over 250,000persons The value added in theJapanese chemical industry
Box 3 THE RESPONSIBLE CARE INITIATIVE
The Responsible Care initiative:
◆ promotes mutual support between companies and associationsthrough experience sharing and peer pressure to identify andimplement best practices;
◆ encourages companies and associations to inform their public aboutwhat they make and do, including the reporting of performancedata and the products they make;
◆ supports education and research on the health, safety andenvironmental issues on chemical processes and products;
◆ helps the industry to engage and work in partnership withstakeholders at the local, national and international levels to listen
to and address their concerns and aspirations;
◆ promotes cooperation with governments and organizations in thedevelopment and implementation of effective regulations andstandards; and enhances accountability through its requirement todevelop credible processes to verify that member companies aremeeting Responsible Care goals and expectations
SOURCE: Status Report on Responsible Care Initiative, International Chemical
Councils Association
Trang 27added in the manufacturing sector.
With an export value of US$ 49
billion in 2005, export orientation of
Japanese chemical industry was 25%
R&D expenditure by chemical
industry in Japan accounted for 16%
of total business R&D; the R&D
expenditure as a percentage of sales
accounted for 5%
China
With a sales turnover of US$ 163
billion in 2005, the Chinese chemical
and second largest in Asia (next toJapan) The growth in the value ofoutput in Chinese chemical industry
is quite high and increasing everyyear In the last one decade, Chinahas displaced France and Germany
to move to the third slot in the worldchemical production The Chinesechemical industry exported goodsvalued US$ 32 billion in 2005; thus,the export orientation is estimated
to be 20% Chemical majors in Chinaare mainly public sector firms
Table 1 CHEMICAL TRADE BY PRODUCTS IN USA (2006)
SOURCE: Chemical and Engineering News
Trang 28Table 2 CHEMICAL TRADE BY PRODUCTS IN CHINA (2006)
continues to actively steer market
entry for foreign companies There
are over 10,000 chemical units in
China, majority of which are set up
as joint ventures
Germany
The German chemical industry
consists of over 2000 firms; some of
them are well-known household
names across the globe However,
over 90 percent of German chemical
firms are small and medium
enterprises with less than 500
employees The chemical industry
in Germany employs around 450,000
persons directly and another 600,000
jobs indirectly The sales turnover
of German chemical industry is
estimated to be US$ 122 billion With
an export turnover of US$ 95 billion,
the German chemical industry has
an export orientation of 77%, one of
the largest in the world German
chemical industry is estimated to be
having 10% share in total
manufacturing output The industry
invests around US$ 10 billion in
Research and Development (R&D).The R&D intensity of Germanchemical industry is estimated to bearound 6%
in France is the largest exportingsector Exports accounted for one-sixth of total exports of themanufacturing sector in France TheR&D intensity of the French chemicalindustry was over 3% of sales, whilethe R&D budget represented over20% of the total value of investmentinto industrial R&D in France
Trang 29Table 3 PRODUCTION OF SELECT CHEMICAL PRODUCTS IN JAPAN
Trang 30Chemical industry in Italy is the
third largest in Europe, after
Germany and France In the year
2005, the production of Italian
chemical industry was valued at US$
60 billion The industry employs
around 130,000 persons The
industry is well represented by small
and medium enterprises (42% of total
units), Italian large enterprises (23%),
and foreign multinationals (35%)
Export turnover of Italian chemical
industry was US$ 26 billion in 2005;
the export orientation of the Italian
chemical industry thus works out to
43% in 2005 Exports to turnover
have grown from 15% to 43% in 15
years, the best performance among
European countries Not only large
firms, but also SMEs in Italy are
strongly oriented to international
markets According to a survey by
Federation of Italian Chemical
Associations (FEDERCHIMICA), over
70% of Italian chemical enterprises
are engaged in R&D activities
UK
Chemical industry is one the largest
manufacturing sectors and top
ranking export sector in UK In 2005,
the UK chemical industry producedgoods worth US$ 50 billion, andaccounted for around 2% of nationalGDP and over 10% of gross valueadded in the manufacturing sector.Exports of chemicals by UK wasestimated to be US$ 38 billion in
2005 The export intensity of the UKchemical industry thus works out to76% The UK chemical industryprovides direct employment toaround 200,000 persons and helps
in creation of indirect employment
to equal number of persons In 2005,the chemical industry in UK made acapital investment of around US$ 2billion, which is over 10% of capitalinvestment in manufacturing sector.R&D intensity of UK chemicalindustry is estimated to be 3% in2004
Canada
The Canadian chemical industrywitnessed a turnover of US$ 26billion in 2005 Exports by thechemical industry in Canadaamounted to US$ 22 billion in 2005.The export intensity thus worked out
to 85% The industry employedaround 80000 persons and providesindirect employment to another200,000 persons
Trang 31Table 4 PRODUCTION OF SELECT CHEMICAL PRODUCTS IN CANADA
Trang 32Chemical industry is one of the
oldest industries that has contributed
significantly to the industrial and
economic growth of India It is
estimated that the size of the Indian
chemical industry is around US$
30 billion Volume of production
by chemical industry positions India
as third largest producer in Asia
(next to China and Japan) and
twelfth largest in the world Theindustry, comprising both smallscale and large units (includingMNCs), produces several thousands
of products and bi-products, rangingfrom plastics and petrochemicals tocosmetics and toiletries Asignificant share (around one-third)
of production by chemical industry
is consumed by itself
3 CHEMICAL INDUSTRY IN INDIA
Exhibit 9 COMPARISON OF INDEX OF INDUSTRIAL PRODUCTION – BASIC CHEMICALS, MANUFACTURING AND GENERAL INDEX OF INDUSTRIAL
PRODUCTION IN INDIA
SOURCE: Central Statistical Organisation, Ministry of Statistics and Programme
Implementation, Government of India
Trang 33The basic chemicals and
chemical products industry has
grown greater than the growth in
manufacturing sector as also the
general industrial production The
data on Index of Industrial Production
(IIP) compiled by Central Statistical
Organisation shows that the IIP
(1993-94=100) for basic chemicals
and chemical products has increased
to 258.5 in 2005-06 as compared to
the index of 234.2 for the
manufacturing sector and 221.5 for
general index, in the same year
The chemical industry accounts
for about 13% share in the
manufacturing output and around
10% in total exports of the country
India is also an importer of
chemicals; however, the chemical
trade balance is positive Theindustry contributes around 20% ofnational revenue by way of varioustaxes and levies
CAPACITY AND PRODUCTION
OF MAJOR CHEMICAL SEGMENTS
SUB-The volume of major basicchemicals produced in Indiaamounted to around 8 millionmetric tonnes (MTs) in 2005-06.This works out to a capacityutilization level of over 80%.Alkalis (such as soda ash, causticsoda and liquid chlorine) are thelargest sub-segment in production
of chemicals amounting to around70% share in volume terms
Table 5 INSTALLED CAPACITY AND PRODUCTION OF MAJOR
BASIC CHEMICALS IN INDIA Major basic Installed Production (MT)
chemical Capacity 2001-02 2002-03 2003-04 2004-05 2005-06
March 2006
and Fertilizers, Government of India
P – Provisional
Trang 34Box 4 MAJOR CHEMICAL GROUPS AND SUB-SEGMENTS PRODUCED IN INDIA
chlorine
Inorganic chemicals – Such as Aluminum fluoride, Calcium carbide,
Carbon black, Potassium chlorate, Sodiumchlorate, Titanium dioxide and Red phosphorous
Organic chemicals – Such as Acetic acid, Acetic anhydride, Acetone,
Phenol, Methanol, Formaldehyde, Nitrobenzene,Citric acid, Maleic Anhydride, Penta-Erithritol,Aniline, Chloro methanes, ONCB, PNCB, MEK,Acetaldehyde, Ethanolamines, Ethyl acetate andOrtho nitro toluene
Pesticides – Pesticides and insecticides registered under the
Insecticide Act of 1968
Dyes and dyestuff – Such as Azo dyes, Acid direct dyes, Basic dyes,
Fast colour bases, Ingrain dyes, Oil soluble(solvent dyes), Optical whitening agents, Organicpigment colours, Pigment emulsion, Reactivedyes, Sulphur dyes, Vat dyes, Food colours andNapthols
Petrochemicals – Such as Synthetic fibres, Fibre intermediates,
Polymer, Elastomers, Surfactants and Performanceplastics
The volume of major basic
petrochemicals produced in India
amounted to around 8 million MTs
in 2005-06 This works out to a
capacity utilization level of over 90%
Polymers (such as Low / High
Density Polyethylene,
Polypro-pylene and Polystyrene) are the
largest sub-segment in production of
petrochemicals amounting to around
63% share in volume terms
The volume of majorpetrochemical intermediatesproduced in India amounted toaround 10 million MTs in 2005-06.This works out to a capacityutilization level of over 98% Olefins(such as Ethylene, Propylene andButadiene) are the largest sub-segment in production ofpetrochemicals amounting to around46% share in volume terms
Trang 35Table 6 INSTALLED CAPACITY AND PRODUCTION OF MAJOR BASIC
and Fertilizers, Government of India
P – Provisional
Table 7 INSTALLED CAPACITY AND PRODUCTION OF MAJOR PETROCHEMICAL
and Fertilizers, Government of India
P – Provisional
Trang 36Table 8 CAGR OF PRODUCTION BY VARIOUS CHEMICAL SECTORS IN INDIA
Trang 37In value terms the size of the
basic chemical industry in India is
estimated to be around US$ 7.5 billion
in 2005-06
In terms of consumption, Indian
chemical industry itself is its largest
consumer; as the basic chemicals
undergo several processing to
manufacture downstream chemicals
The industry accounts for
approximately one-third of the total
consumption
With over 40000 units, the
industry is widespread and has
presence in both small and
large-scale sector The advantages of SSI
reservations and the fiscal
concessions extended to this sector
facilitated establishment of large
number of units in the Small Scale
Industry (SSI) sector Gujarat is the
major contributor to the basic
chemical as well as petrochemical
production with 54% and 59% share,
in all India production, respectively
Other major states producing basicchemicals include Maharashtra (9%),Tamilnadu and Uttar Pradesh (6%each) Other major states producingpetrochemicals include Maharashtra(18%), West Bengal (12%), UttarPradesh (4%) and Tamil Nadu (3%)
EXPORTS
Since the formation of World TradeOrganisation, structural changeshave happened in chemicals trade.There has been reduction in tarifffor chemical imports in developedcountries However, non-tariffbarriers associated withenvironmental issues areinfluencing the chemical imports bydeveloped countries
India has been increasing itsexport of chemical products in therecent years The trend analysis ofIndia’s exports of major chemicalproducts in the last four years isgiven in Exhibit - 11
Exhibit 10 SHARE OF MAJOR STATES IN PRODUCTION OF CHEMICALS AND
PETROCHEMICALS IN INDIA (2005-06)
SOURCE: Compiled from Chemical and Petrochemical Statistics at a Glance, Ministry
of Chemicals and Fertilizers, Government of India
Trang 38Analysis of production and
export performance of major
chemical segments are given in the
following sections:
Organic chemicals
Most of the chemical compounds
that contain carbon atoms are called
organic chemicals Organic
chemicals are used in many
household products like paints,
varnishes and products of cleaning
and disinfecting In the year
2005-06, India is expected to have
produced 1.5 million MTs of
organic chemicals Major products
produced include methanol, acetic
acid, formaldehyde and
acetaldehyde India’s export of
organic chemicals in the year
2005-06 was valued at US$ 4.85 billion
(April – June) of 2006-07 werevalued at US$ 1.32 billion
Major markets for Indian organicchemicals include USA, China,Indonesia and Germany The share
of USA market in India’s exports wasaround 11%
Inorganic chemicals
Inorganic chemicals are substances
of mineral origin, but not ofbasically carbon structure Theseinclude nitrate, fluoride and metals.Inorganic chemicals are mostly used
in detergents, soaps, and fertilizers.Major products produced in Indiaare carbon black, titanium dioxideand calcium carbide In the year2005-06, India is estimated to haveproduced 544,000 MTs of inorganic
Exhibit 11 TRENDS IN INDIA’S EXPORT OF SELECT BASIC CHEMICAL PRODUCTS
SOURCE: Directorate General of Commercial Intelligence and Statistics, Ministry
of Commerce and Industry, Government of India
Trang 39which are commonly used to
manufacture products like bleach,
ammonia, detergent powder, drain
cleaners, hair color preparations,
depilatories, alkaline disk batteries
are also produced in India India
has built up capacity of alkalichemicals viz., soda ash, causticsoda and liquid chlorine Theestimated total production of theseitems in the year 2005-06 was5.47 million MTs
Exhibit 12 COUNTRY-WISE EXPORT OF ORGANIC CHEMICALS FROM INDIA (2005-06)
SOURCE: Directorate General of Commercial Intelligence and Statistics, Ministry
of Commerce and Industry, Government of India
Exhibit 13 COUNTRY-WISE EXPORT OF INORGANIC CHEMICALS
FROM INDIA (2005-06)
SOURCE: Directorate General of Commercial Intelligence and Statistics, Ministry
Trang 40India exported inorganic
chemicals valued US$ 775 million
in 2005-06 In the first quarter of
2006-07 (April – June), India has
achieved an export level of US$ 228
million Major markets for India’s
inorganic chemicals include China,
Iran, USA, Sri Lanka, Singapore and
Indonesia China alone accounted for
about 42% of India’s exports in
2005-06
Dyes and Pigments
Indian dyestuff sector is one of
the important segments of Indian
chemical industry The dyestuffs
find usage either as raw material
or for direct application in a
number of manufacturing sectors
like textiles, leather, paper, printing
inks and foodstuffs Indian dyestuffsector has emerged as a leadingplayer in the world market with ashare of over 6% In the year2005-06, the production of dyesand dyestuffs in India wasestimated to be 29,541 MTs Majordyestuffs produced in India areorganic pigment colours, azo dyes,sulphur dyes, reactive dyes andpigment emulsion
India exported tanning andcolouring materials (including paints)worth US$ 847 million in 2005-06.Exports during the first three months(April-June) of 2006-07 wereUS$ 231 million Major destinations
of Indian dyestuff materials are USA,Germany, Italy, China, Turkey, UK,The Netherlands and Belgium
SOURCE: Directorate General of Commercial Intelligence and Statistics, Ministry
of Commerce and Industry, Government of India
Exhibit 14 COUNTRY-WISE EXPORT OF DYES, PIGMENTS AND OTHER COLOURING
MATERIALS FROM INDIA (2005-06)