http://www.specchemonline.com/articles/view/distributed-worldwide#.

VTj4YfmUed4
Chemicals distribution in the BRIC markets is changing rapidly. Andrew
Warmington reports from the FECC Congress in Hamburg
At this year's European Association of Chemical Distributors (FECC) congress in Hamburg in June, eyes
turned to the BRIC markets, with presentations on China by Jean-Marie Mersonne of Chemroute, a
subsidiary of the diversified Stockmeier Group, by David Brown, a director of consultancy Chemagility, on
India, and on Brazil by Rubens Medrano, president of Associquim, the national trade body for distributors
of chemicals and petrochemicals.
In a 2011 survey, said Mersonne, nearly 78% of German companies named China as a top three priority
in their global investment plans, with one third of these naming it their top priority. 45.3% of them saw
European companies as their main competitor in China, though Chinese companies (31.2%) were
catching up fast and are far ahead of other Asian and US firms in that regard.
Chinese companies, Mersonne added, are increasingly pursuing the world market - for instance Yipin,
which will be the world number two in pigments by 2014. Moreover, there is a natural synergy. "China
wants access to technology that will improve safety, the air and water, living standards and product
quality. We want to unlock the potential of the Chinese market during a crisis of demand in Europe."
The Chinese chemical distribution industry naturally mirrors that of its chemicals industry. Historically that
has meant being located mainly on the coast, where there are 18 major port facilities for liquids from
Qinghuangdao in the north to Zhanjiang in the south and 17 of the 20 major chemical parks, with a cluster
of the latter in and around Shanghai.
Currently, according to Mersonne, an estimated 54.5% of China's 10,000+ chemical distributors are
based in Shanghai, with Guangzhou (12.5%) the next largest base. The rest are dotted mainly around
Zhejiang and Jiangsu provinces, next to Shanghai, or Guangdong province and Hong Kong in the south.
It is a fragmented, unsophisticated sector.
"About 15% of distributors in China work with only one supplier. It is essentially volume-driven and they
act like traders; right now, the big question is 'should we move from commodities to specialities,"
Mersonne said. "There are no added-value services like blending or mixing, and no special payment
terms - it really depends on how much they like you! Standardisation is lacking in transport and logistics."

Chemical industry parks in China

As part of its 12th Five-Year Plan, however, China aims to shift further towards supplying domestic rather
than export demand, while reducing its carbon intensity by 40-45% from 2005 levels by 2020. As part of
this, it will move huge amounts of the most polluting industries inland to giant parks. This is already
happening in sectors like coatings, pharmaceuticals and fine chemicals.
By as early as 2020 Chengdu and Chongqing could be where the action is for chemicals and distributors
will have to respond. This also means that, with the far greater distances to be covered, according to
Mersonne, "distribution will become more of a headache, as costs will rise ... Today is the best moment to
jump on the boat."
The chance could be there for international companies to take part in the process. However, they must
also proceed with caution as China is and will remain very different to the West. Government will continue
to steer industry, even as it becomes more open and shifts its focus from revenue to costs, while stateowned enterprises will still enjoy preferential treatment.
A recent survey by Chemagility, Brown said, had found the Indian chemical distribution industry to be
extremely fragmented but it is outpacing even the rapid growth of India's 70 billion chemicals industry.
Maharashtra and Gujarat together account for 40% and 25% of this respectively, the former is also home
to large chunks of downstream industries and the major port, Mumbai.
Currently, agents and indentors form the most important 'channel arrangement' in India and this, Brown
said, is the most significant difference from Europe. Those surveyed mainly (62.5%) believed that
distribution would increase in the coming years.
Although there are no official figures, 75% of those surveyed by Chemagility estimated that, not counting
one-man operations, there are over 1,000 organised distributors in India employing over 10,000 people in
total; some estimate there are as many as 5,000 firms. The market is estimated at 3.7 billion in 2011,
having grown at 14.2% for the previous five years.

Long-established, independent, regional companies account for about 80% of the market; RSG, for
example, dates back to independence in 1947. One respondent said that there are "only a handful" of
pan-Indian distributors. Multi-nationals have become a factor relatively recently, with Brenntag and DKSH
active in India since 1989 and 1996 respectively.

Figure 1 - Challenges facing distributors operating in India

Asked what the key challenges facing them were, the distributors named increasing competition first
(Figure 1). This is already a highly competitive sector, with low barriers to entry, in which many very small
companies are active. Second was government and local taxes, a perennial issue in a country with a
complex patchwork of internal taxes where moving goods by truck costs about three times as much per
kilometre as Europe.
Pharmaceuticals (87.5%), food and drink (75.0%) and personal care (66.7%) topped the list of industries
expected to see most growth for distributors to 2016. Personal care, albeit from a low base, will be mainly
driven by imported specialities. Distributors also expect strong growth in chemical consumption in
agriculture and construction-related areas, with a surge of infrastructure-related investment anticipated in
the next five years.
Two thirds of those surveyed expect to see >15%/year growth in the Indian chemical distribution sector to
2016 and all expect >7%/year, potentially doubling the market to over 7.5 billion and making it the fourth
largest in the world. "It could be even more if infrastructure issues are addressed and there is a free trade
agreement with the EU," Brown said.
When asked what they expected of M&A involving Indian distributors, there was an agreement that it will
certainly not decrease and over 90% thought that it would increase in the next two years, leading to some
degree of industry consolidation. The key challenges to this process were headed by difficulties with due
diligence and corruption (cited by 70.8%), maintaining supplier arrangements (62.5%), the small number
of viable or attractive companies (58.3%) and unrealistic valuations (54.2%).

Hamburg, venue for the FECC Congress, is one of Europe's great port cities
To date, Brown remarked, there has been minimal international involvement in the process, though Azelis,
Brenntag and DKSH have all made acquisitions in India in recent years. To those who might be interested
in acquiring a local chemical distributor in India, Brown had five items of advice, though he added that the
key point is "due diligence, due diligence, due diligence", in financial, marketing, people, legal and other
terms. The others were

Clear goals & objectives: Because of India's vast scale, a regional/state/target market approach is
needed. Exporters to developed markets often have a more professional set-up
Review entry options, which could be liaison or representative offices, branch offices, JVs and
wholly-owned subsidiaries
Business valuation: Large EBITDA multiples should not be expected as Indian owners have high
expectations of future growth
Post-deal follow-through: Acquisition can be a lengthy, bureaucratic process and is a long-term
commitment. Profits will probably not match market growth and corporation tax is high
In Brazil, as in China and India, Medrano showed, there is a clear geographical concentration, in line with
that of the industry as a whole. In 2012, 75.3% of chemical distributors were based in So Paulo state
and 49.4% of their sales were too, albeit that these proportions have fallen somewhat since 2008; the
hitherto underserved north-east is seeing the fastest growth. The top single markets they serve are paints
and varnishes (19.8%), chemical processes (12.1%), agriculture (9.5%) and pharmaceuticals (6.2%).
Growing most rapidly are food and cosmetics.
This is still a fragmented market, Medrano observed; the top ten players had only about 35% of it in 2012.
Distribution still only accounts of 11.4% of all chemical and petrochemical sales "so there is a lot of scope
for it to increase to the typical level of the West". This was also confirmed by a survey of the top ten
domestic producers, which found that 70% of them sell less than 30% of their volumes via distribution.

Figure 2 - Desired dynamics of distribution in Brazilian chemicals market

"We have seen a move to reduce costs, so there is a lot of interest among producers in distribution as a
one-stop shop," added Medrano. "The main concern is about the financial security of the companies they
work with as they want to be sure their partners won't go out of business." Other key requirements when
choosing a distributor were:

Certifications, regulatory compliance & licences

Market expertise, i.e. a deep knowledge of the market and a portfolio of complementary products
Scope, i.e. national coverage and 'capilarity'
A strong financial structure
Image, i.e. ethics, sustainability and corporate governance
Key suggestions arising from all this, in terms of relationships with producers, were that reliability is
imperative. Distributors should be true partners, exchange information on market trends and meet market
demand. A senior manager dedicated to contacts with producers is seen as an advantage, Medrano
noted. Regarding logistics, increased safety levels and diverse area coverage are key, particularly in the
north-east, where distributors' roles are more important.
Looking next at relationships with clients, distributors should be a source of information, develop markets
and disseminate sustainability as a concept. Other key attributes included taking the long-term view,
adding value to products, the ability to analyse and discuss sales profiles, solving technical problems and
investing more in technical qualifications (Figure 2).
From the industrial consumers' perspective, the main conditions determining the choice of sales channel producer, importer or distributor - were price (41.7%) and sales conditions (18.3%), ahead of added
service (15.6%) and service (15.0%). Service, transport and packaging and portfolio of products were
seen as strong points for Brazilian distributors at present, with technical support the weakest area.
"Increasing communication will perfectly meet the need of taking new alternatives to the consumer and
new demands to the producer, while improved qualification can provide a more skilled level of information

for the client," Medrano said. The negative differentiator for distributors right now is price, so they should
add services to show the client what else he is getting for his money.
"Distribution is becoming more important as an additional sales and service channel and remains an
attractive channel for suppliers that will take a higher percentage of volumes. Brazilian distributors will
increasingly become importers. And there will always be room for well-run businesses of every size,
shape and configuration," concluded Medrano.

Contact:
Camila Diaz Oliveros
FECC
E-mail: cdi@fecc.org
Website: www.fecc.org

http://www.icis.com/resources/news/2009/03/30/9204109/is-india-s-chemicaldistribution-market-a-hotspot-/
Is India's chemical distribution market a hotspot?
30 March 2009 00:00 Source:ICIS Chemical Business
Chemical distribution is well established in India, but poor systems and infrastructure have
posed barriers to reaching its potential
despite the challenge of poor business infrastructure, chemical distribution in India presents enticing
opportunities that have attracted the attention of global players now building a presence in the
country.
"The chemical distribution industry in India is a long-established business - however, it is categorized
primarily by owner-driven companies, as opposed to professionally managed companies that exist in
North America and Western Europe," says Gurtaj Kahlon, managing director of India-based chemical
distributor Imkemex International.
A few global players have entered India or plan to, notably Brenntag of Germany and pan-European
distributor Azelis, says Kahlon.
"However, most of these companies do 'indent' as opposed to ex-stock distribution due to the high
risks - in particular with the credit in the Indian market - and low margins that exist. Considering that
the Indian market already has an established distribution industry, the best route to enter the same
would be via acquisitions," he says. Indent means the distributor distributes on behalf of the seller.
Ex-stock means the distributor buys, then sells, the products outright.

But acquisitions can be difficult owing to the fact that most chemical distribution companies are
owner-driven, and hence lack the necessary professional infrastructure and systems, as well as
human infrastructure.
"[However], there are no logistical hurdles for entry, and I would add that there are logistical
opportunities," Kahlon says.
MAKING INROADS
The September 2008 acquisition of French chemical producer Rhodia's distribution networks by
Brenntag expanded its distribution operations to India. "We learn every day in this market," says
Henri Nejade, CEO, Brenntag Asia Pacific. "We are currently exploring both joint venture and
acquisition opportunities in India with an open mind."
The acquisition also gave Brenntag access to Australia, Taiwan and the Association of Southeast
Asian Nations (ASEAN) countries of Indonesia, Malaysia, Philippines, Singapore, Thailand and
Vietnam. This step is part of Brenntag's strategy to provide a platform for future growth as a full-line
chemical distributor in the rapidly expanding Asian economies.
Brenntag will supply a broad portfolio of specialty chemicals into fast-growing industries including
personal care, food, feed, electronics, and adhesives, coatings, construction, elastomers and
sealants through an exclusive partnership with Rhodia and other principals in the respective
countries.
The company has obtained products in Asia for sale in other parts of the world for many years. Its
current sourcing volume amounts to more than 120,000 tonnes/year, with emphasis on China and
India, according to Brenntag.
Meanwhile, Azelis has gained a foothold in India by acquiring local distributor Marigold
International last year.
"This provides Azelis with a platform in India for both sourcing products for customers and, most
importantly, offering Western manufacturers a route to market in the rapidly growing Indian
economy," the company said in a statement.
Marigold International has total sales of 22m/year ($28.6m/year) and focuses on the polymer and
chemical sectors. Azelis plans to expand its reach into other key sectors, including coatings, food
and personal care.

The move into India is Azelis's first step in selling outside Europe as part of its strategy to expand
into the Asia-Pacific region. The company already has an established presence in Shanghai, China.
THE LANDSCAPE
These days, India is attracting attention as an emerging power with impressive economic growth
surpassed only by China's. India is the second most populous country after China, and with rising
disposable incomes, a new Indian middle class has emerged, accounting for nearly one-third of the
country's population.
This new middle class is a significant driving factor in the growth of India's economy and its chemical
consumption, according to Masaru Kani, executive consultant, writer and editor in chief, Mitsubishi
Chemical Techno-Research. The firm last year released a report on the chemical industry in India.
India's was the fourth-largest economy in 2006, according to the World Bank's purchasing power
parity world GDP ranking.
"India shifted its stance to economic deregulation in 1991 and [continued] to grow with [an estimated]
high annual GDP growth rate of 7.5-9.6% over the period 2003-2008, fueling double-digit growth of
its chemical industry," says Kani.
However, largely underdeveloped social and industrial infrastructure throughout the county has
obstructed the capital investment environment.
"The federal government of India understands the gravity of this stumbling stone enough to invite
private capital for power station, road, and seaport construction projects in the 11th five-year plan for
the country," Kani says.
India's chemical industry has been growing at a significantly higher annual rate than the country's
GDP. The chemical industry in India is expected to grow by 13.6%/year, to $75.8bn, by 2011,
according to Kani.
India has three major industrial associations that cover general chemicals, petrochemicals and
pharmaceuticals. The general chemical sector includes organic and inorganic compounds,
agrochemicals, dyes, specialty chemicals and fertilizers. The petrochemical sector includes basic
and intermediate petrochemicals, synthetic fibers and plastics, while the pharmaceutical sector
covers generic medicines, intermediate pharmaceutical ingredients, formulated bulk medicines, and
active pharmaceutical ingredients (APIs).

The pharmaceutical industry has attracted especially keen global attention. But India is still in a
developing stage with a mix of innovative and outdated technologies. Some manufacturing lines are
big and modern, but others are too small and old-fashioned, Kani says.
"The federal government of India encourages its drug industry to invest in R&D [research and
development] of innovative pharmaceuticals, responding to the given changing circumstances. In the
past 30 years, the pharmaceutical industry in India has firmly built itself into the world-leading
business circle of high-quality generic medicines and has exported its products to more than 200
countries including the US, Russia, China and the UK," Kani adds.
Per capita consumption of all chemicals is one-tenth of that in more well-developed countries.
"That is nothing other than an encouraging indication in that the chemical industry of the country as a
whole has a great future yet to be explored," says Kani. "The time is already maturing for a great
step forward for the industrial segment."
Total chemical consumption in India, and in the Asia region overall, is expected to significantly grow
when per capita income reaches a sufficient level in the coming years, he says.
Foreign direct investment by major chemical companies outside India has commonly been a driving
force for the country's economic growth. As sales of certain products, produced outside India and
sold to the domestic market increased, some major chemical firms started their own local production
in India.
Local production in the country by foreign chemical companies includes spinning additives, dyes,
dye-fixing additives, drugs, agrochemicals, and other intermediate chemicals.
"Now major foreign drug producers are coming to India to start local manufacturing and selling in
India, and [to] set up R&D subcenters in India. Some major foreign chemical producers have
concluded contracts with Indian companies for toll production of pharmaceutical intermediate
chemicals," says Kani.
Meanwhile, a limited number of foreign major petrochemical companies have begun local production
of their own in India, but there are currently no plans to promote projects for petrochemical
complexes in the country, he adds.

http://www.processworldwide.com/management/markets_industries/articles/353652/

hemical Distributor Brenntag Opens New Indian HeadOffice

02/17/2012 | Editor: Dominik Stephan

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Gallery: 1 image

Brenntag Indian team welcoming Brenntag Group CEO, Steven Holland, at its new
Mumbai office opening. (Picture: Brenntag)

Chemicals distributor Brenntag has a new Indian headoffice in Mumbai. The

company expects India to become a future keymarket for chemicals, CEO
Steven Holland explained.
Mumbai/India Chemicals distributor Brenntag has recently opened its new head
office in Mumbai, India. According to company speakers, the new facility underlines
the firm's commitment to invest in India, where Brenntag expects to grow over the
next few years.
The German based company has been active in India since 2008, where it focuses in
various industry segments such as Agro, Coatings, Food & Beverage, Leather,
Lubricants, Personal Care, Pharmaceuticals, Plastics & Polymers, Polyurethanes,
Solvents and Textile. Currently, Brenntag has seven offices in India (Baddi,
Bengaluru, Chennai, Gurgaon, Haridwar, Hyderabad and Mumbai).).
At the inauguration of the new office, Steven Holland, CEO of Brenntag Group, said,
India is a key market in Brenntags global strategy. By expanding our local presence
in major cities like Mumbai, we are supporting our strategy of being the leading
chemical distributor in both specialty and industrial chemicals. We already have a
strong foothold in India and we expect to take advantage of the high growth potential
in the Indian market.
Advertisement

The new headquarter also offers in-house Food & Beverage and Personal Care
technical application laboratories, to offer value-added services to customers by
meeting specific requirements for the formulation and customisation of various blends
of ingredients and chemicals, the company explained.
http://www.vccircle.com/news/commodities/2014/09/03/brenntag-buying-specialtieschemicals-distribution-unit-pioma-chemicals

Brenntag buying specialties chemicals

distribution unit of Pioma Chemicals
BY JASLEEN KAUR BATRA

The acquired business is expected to generate sales of over Rs 137 crore.

German chemical distributor Brenntag has signed an agreement to acquire the specialties
chemicals distribution business of Pioma Chemicals, a Mumbai-based distributor of specialty
excipients and functional ingredients to the pharmaceutical, personal care and food
industries across India, as per a company statement.

The acquired business is expected to generate total sales of over 17.2 million (Rs 137
crore). The transaction, which is expected to close this month, will be structured as an asset
deal and the acquired business will become part of Brenntag's Indian arm.
With the acquisition of Pioma Chemical, Brenntag hopes to strengthen its growing business
in India by expanding the local and regional strategic supplier and customer relationships
and improving the product portfolio.
This acquisition enables us to expand our position in the Indian specialties distribution
market even further, following our successful acquisition of the Zytex distribution business
last year, said Henri Njade, president and CEO, Brenntag Asia Pacific.
Brenntag had earlier acquired the chemical distribution division of another Mumbai-based
firm Zytex to strengthen its nutrition and health business in India.
Founded in 1874, Brenntag operates as a link between chemical manufacturers and
chemical users. With over 10,000 products, it caters to more than 170,000 customers.
Headquartered in Mlheim an der Ruhr, Germany, it operates a global network with more
than 480 locations in more than 70 countries.
Set up in 1989, Pioma Chemicals is into distribution of specialty excipients and supplier of
functional ingredients to the pharmaceutical, nutraceutical, personal care, food & allied
industries across India. It has partnered with over 20 international companies for the supply
of over 2,000 products ranging from functional excipients to actives.

http://www.brenntag.com/en/pages/Presse/news/2013/Zytex.html
Brenntag expands distribution in the Indian market
Brenntag, the global market leader in chemical distribution, has signed an agreement to acquire the
chemical distribution division of the Zytex Group, a biotechnology food formulation and manufacturing
company in India, by means of an asset deal. The acquired food ingredients distribution business will
become part of Brenntag India, headquartered in Mumbai.

The acquired business has its focus on enzymes and yeast for a broad application range in the food and
beverage industries in India. With this acquisition Brenntag is further strengthening its Nutrition and Health
business in India by adding new customer segments and products to its portfolio as well as further
expanding its strategic relationships with key global suppliers.

Henri Njade, President and CEO of Brenntag Asia Pacific: India is already one of the largest chemical
distribution markets in Asia and offers substantial growth opportunities. This acquisition further underlines
our commitment to India and our Indian partners. Our Indian business has rapidly grown over the past few
years partly through organic growth as well as strategic acquisitions. This new business will improve our
economies of scale, broaden our product offerings to our Indian customers, strengthen our Pan-Indian sales
and distribution organization and will help us to accelerate the growth of Brenntag India in the coming years.

Brenntag expects the acquired business to generate annual sales of 7.0 million, gross profit of 1.8
million and EBITDA of 1.4 million in the financial year 2013. The investment amount will be 10.2 million.
The transaction is expected to be closed in September.

About Brenntag:
Brenntag is the global market leader in full-line chemical distribution. Linking chemical manufacturers and
chemical users, Brenntag provides business-to-business distribution solutions for industrial and specialty
chemicals globally. With over 10,000 products and a world-class supplier base, Brenntag offers one-stopshop solutions to more than 170,000 customers. The value-added services include just-in-time delivery,
product mixing, formulation, repackaging, inventory management, drum return handling as well as
extensive technical support. Headquartered in Mlheim an der Ruhr, Germany, the company operates a
global network with more than 450 locations in over 70 countries. In 2012 the company realized global sales
of EUR 9.7 billion (USD 12.5 billion) with nearly 13,000 employees.

http://www.business-standard.com/content/b2b-chemicals/indian-chemicalsindustry-to-record-11-12-growth-rate-frost-sullivan-114010801336_1.html

Indian chemicals industry to record 11-12%

growth rate: Frost & Sullivan
Specialty chemicals sector to experience higher growth rate of 13-14%
BS B2B Bureau | Mumbai January 8, 2014 Last Updated at 12:57 IST

The Indian chemicals industry, which earned revenues in the range of $ 155-160 billion in 2013, is likely
to grow at a rate of 11-12 percent in the next two to three years, according to Frost & Sullivan, a business
consulting firm. Owing to reduced industrial output, commodity and bulk chemicals are likely to
experience slow growth, while the specialty chemicals segment is expected to show considerable growth.
Personal care ingredients and additives, knowledge chemicals like Active Pharmaceutical Ingredients
(APIs), paints and coatings, and construction and water chemicals are some of the segments that are likely
to perform well. Even in 2013, these sectors showed good growth and companies in this segment have

been investing and expanding, said Chaitra Narayan, Associate Director, Chemicals, Materials & Foods
Practice, Frost & Sullivan.
The specialty chemicals sector is characterised by requirements for high-value products, high-volume
requirements with expanding customer base, a product-driven market, and addition of new participants
at various levels of the value chain. Overall, the market is likely to grow at a Compound Annual Growth
Rate (CAGR) of 13-14 percent. Product customisation and understanding of unique customer needs has
been one of the key success levers for the Indian chemical industry. In terms of production value, the
specialty chemicals sector forms about 18-20% of the total chemical production in India, added Narayan.
Though increasing regulatory requirements and raw material price fluctuations (India is dependent on
imported raw materials) have posed challenges for manufacturers, exports have been increasing at a rate
of 8-9 percent. The growth is likely to continue due to a good and established customer base for specialty
and niche products.

http://www.thehindubusinessline.com/industry-and-economy/the-organic-growthstory/article5350802.ece

The organic growth story

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Industry making strides despite hurdles

MUMBAI, NOV. 13:
The chemical industry has been registering a steady growth in the last few years, largely due to
buoyant demand from the diversified sector it serves. The key consumer industries of chemicals
include automotive, electronics, fast moving consumer goods, agriculture and food processing.
Despite all the drawbacks faced by the chemical industry, India emerges as one of the focus
destinations for chemical companies worldwide. With the focus to strengthen and provide support to
the industry, the Government had made a provision of Rs. 575 crore in the XIIth five-year Plan
period started last year.
Of the total provision, the Government has provisioned Rs. 500 crore for establishing technology
upgradation, which implies an annual outlay of Rs. 100 crore a year.

ORGANIC CHEMICALS

Organic chemicals industry is one of the most-significant sectors of the chemical industry. Major
organic chemicals produced in India include methanol, acetic acid, formaldehyde, pyridines, phenol,
alkyl amines, ethyl acetate and acetic anhydride.
It plays a key role by providing chemicals and intermediates as inputs to other sectors such as paints,
adhesives, pharmaceuticals, dye stuffs and intermediates, leather chemicals and pesticides. Acetic
anhydride is widely used as a reagent. Natural gas/naphtha are mainly used as feedstock for the
manufacture of these organic chemicals. Alcohol is also an important feedstock for the industry, with
sizable production of acetic acid and entire production of ethyl acetate being based on alcohol.
Global production of organic chemicals was around 400 million tonnes in 2010-11 with major
contribution from US, Germany, UK, Japan, China and India. Few Latin American countries such as
Brazil and Chile are also increasing their presence in the global organic chemicals market.
Formaldehyde and acetic acid are important methanol derivatives and are used in numerous
industrial applications. Phenol is an aromatic compound and derived from cumene, benzene and
propylene derivatives.
Alkyl amines are used in the manufacture of surfactants. Pyridine derivatives are used in the
manufacture of pharmaceuticals. Ethyl acetate is the ester of ethanol and acetic acid and is
manufactured for use as a solvent.
CHALLENGES FACED

Indian companies have been facing a lot of challenges compared to their global peers. Since most of
the Indian manufacturers operate on a small scale compared to global companies, there is a room for
consolidation in Indian organic chemicals industry. Domestic players can take advantage of
economies of scale arising from consolidation and become more competitive thereby preventing
cheaper global imports. Domestic organic chemicals players do not have the advantages of backward
integration and hence they lack pricing flexibility.
The Planning Commission has estimated that the demand for basic organic chemicals to grow at 10
per cent per annum to touch five million tonnes by 2017-end. To cater to this demand and move
towards self-sufficiency, the organic chemical industry must target a growth of 10-12 per cent per
annum, it said.
Availability and pricing of natural gas and naphtha at competitive prices are major constraints. The
poor quality of Indian coal makes production of methanol uncompetitive at prevailing pricing for
coal in India. As a result, the industry is primarily dependent on import of methanol from West Asia
and China.
Large production capacity of methanol established in West Asia and China will continue to put
pressure on the Indian industry. Viability of local production, in the absence of any fiscal and
regulatory support from the Government, will continue to be a concern. Methanol production from
petcoke and coal may be incentivised to make the production economically viable.

ROLE IN AGRICULTURE

Chemicals play a vital role in the agriculture sector to improve yield and providing various pesticides.
India is the fourth-largest producer of pesticides after US, Japan and China. India is the secondlargest producer of pesticides in Asia. The Indian pesticides industry has been growing at 9 per cent
per annum over the past five years.
Facing the daunting task of providing food security to over one billion Indians with diminishing
cultivable land resources, the agriculture sector has to depend on high-yielding seed variety,
balanced use of fertilizers, judicious use of quality pesticides, along with educating farmers and use
of modern farming techniques.
The pesticides industry has developed substantially and has contributed significantly towards
agriculture. In value terms, the size of the Indian pesticide industry is estimated at $3.8 billion in
2011. India is a predominant exporter of pesticides to the US, Europe and African countries. The
domestic industry is characterised by over-capacity, low capacity utilisation and unsustainable levels
of production from many units and low investments in research and development.
Besides, the formulation market is highly fragmented with a large number of small formulators.
Globally, there is a growing trend towards low dosage and high potency molecules, and the market
for usage of high volume pesticides is declining.
With the advent of the integrated pest management technique, the use of bio pesticides and
genetically modified seeds has increased globally.
suresh.i@thehindu.co.in
(This article was published on November 14, 2013)

http://chemical.indianpetrochem.com/benzenereport

Benzene

Benzene is used mainly as an intermediate to make other chemicals. About 80% of benzene is
consumed in the production of three chemicals, ethylbenzene, cumene, and cyclohexane. Its most
widely produced derivative is ethylbenzene, precursor to styrene, which is used to make polymers
and plastics.
Cumene is converted to phenol for resins and adhesives. Cyclohexane is used in the manufacture of
Nylon. Smaller amounts of benzene are used to make some types of rubbers, lubricants, dyes,
detergents, drugs, explosives, and pesticides. Most of the domestic demand for Benzene is met through

domestic production and the remaining is exported to the international market. In India, Benzene is mostly
produced through Catalytic Cracking.

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Benzene is one of the major organic chemicals produced in India. Almost all the consuming sectors of
Benzene have witnessed growth rates of more than 2% in the past 5 years, indicating a strong demand of
Benzene in the present market scenario. Production of Caprolactum/Cyclohexane is the largest consumer
of Benzene accounting for more than a quarter of the domestic production of the country and expected to
achieve growth rates close to 3% in the next 5 years. LAB, Aniline and Nitrobenzene production are other
major consumers of Benzene in the country expected to witness modest growth in the coming years.
Western region of the country is the largest hub of Benzene consumption, accounting for almost half of
domestic Benzene consumption. Other regions of the country share approximate similar Benzene
requirements, which are however, expected to increase in the future.
Reliance India Limited, IOCL, BPCL and Haldia Petrochemical Corporation are the chief Benzene
manufacturers in the domestic market. Though demand has seen a modest growth, it is still playing catch
up to the domestic production. India's excess domestic production mandates producers and exporters to
export Benzene. Currently, Saudi Arabia is the biggest importer of Indian Benzene, importing more than a
quarter of the total quantity exported from India. Spain, Singapore, Belgium and USA also hold the rest
amount of share. Although, India needs to further expand its percentage of exports and increase the
production up to its full capacity so as to enhance the export market.
In 2013, Benzene demand throughout markets has gone down, European markets being the most
affected due to lack of capacity. American benzene market also went down. Increased production and
consumption of shale oil and shale gas has resulted in ethylene producers shifting their feed stock slates
from naphtha to ethane during the past several years. This shift in feed slates has, in turn, driven the
decline in the benzene production rate in North America. Asian markets fared better than the other two,
but functioned on thin capacity.