Behind the muted demand outlook for chemicals sector

A report by Emkay Research on the specialty chemicals industry says demand has stayed muted even in the third quarter. Geography-wise, Europe, China and some Asian markets remain weak, whereas US and domestic demand are relatively stable. Discretionary spends like pigments and polymers have improved, whereas textiles and dyes remain weak, says the report.

"We expect bulk chemical companies with a relatively diversified end-user market to recover faster once demand improves, followed by a gradual recovery in agrochemicals and pharma," says Emkay.

Domestic demand in China remains muted, says the report.

"The industry experts who visited China this month see no optimism in demand with Chinese players. The slowdown in China’s real-estate sector remains the key drag for its domestic demand. Despite a series of government stimulus measures, China's property market continues to show little sign of revival, hence leaving investors and homebuyers in a state of uncertainty," it says.

Such conditions have put downward pressure on Chinese demand, and, as a result, Chinese players are dumping chemicals in other parts of the world (except the US) at significantly lower prices to utilise their capacities. Unless Chinese domestic demand recovers, the pricing pressure is here to stay, says the report.

Read the Emkay report here.