Trade war offers new opportunities for Indian specialty chemical firms

October 1, 2020: India may be the world’s pharmacy, but China has long dominated the manufacture of key raw materials used to make pharmaceutical formulations. The current upswell in trade barriers between China and the rest of the world, however, presents Indian specialty chemical players with a window of opportunity.

For instance, industry reports peg the Indian pharma industry’s dependence on China for Active Pharmaceutical Ingredients (API) at 60-70 per cent. According to analysts, however, India’s specialty chemicals sector is well-poised to chip away at the market dominance of its neighbour China.

“Many downstream multinational companies that imported the bulk of their chemical requirements from China may consider supplementing this supply from elsewhere. Large chemical markets that remain accessible in this scenario could present opportunities for Indian chemical companies,” noted analysts from HDFC Securities Institutional Research in a recent report.

Similar opportunities are opening up in India too, especially since regulatory scrutiny over China-origin products has increased significantly post the summer border conflict in Ladakh. On Monday, for instance, India’s Directorate General of Trade Remedies (DGTR) began a probe into the alleged dumping of a certain pharmaceutical raw material by Chinese firms.

The watchdog was acting on a report filed by Indian pharma firms Nectar Life Sciences and Sterile India alleging that there has been “material injury” caused to the domestic industry due to dumped Chinese imports. HDFC Securities believes Indian specialty chemicals firms are well-poised to take advantage due to high spending on R&D and capacity building over the past few years.

“Over the last four years, companies which have expanded their product portfolio to supply chemicals to pharmaceutical and agrochemical industries, have invested heavily in developing R&D capacity,” it noted, adding that such firms continue to spend heavily.

Source: Business Standard