Amid the rising prevalence of industrialisation on a global scale, numerous industrial sectors are on the lookout for efficient components to help boost not only their production processes but overall product performance. One such component is specialty chemicals.

Specialty chemicals refer to products that deliver myriad performance effects to an array of industrial sectors. These sectors include ink additives, oil & gas, construction, food, cosmetics, and textile among others.

Specialty chemicals or performance chemicals are generally used as ingredients that help to enhance the manufacturing process, as well as in finished products. They are single-chemical entities for formulations and are utilised based on their performance and function. The composition of specialty chemicals varies depending on their usage and asserts significant influence on the user’s product performance.

Based on product, the specialty chemicals market is classified into various segments, including Polymers & Plastic Additives, Agrochemicals, Cleaning Chemicals, Paper & Textile Chemicals, Adhesives & Sealants, Lubricants & Oilfield Chemicals, Construction Chemicals, Specialty Coatings, Electronic Chemicals, Food Additives, and Surfactants, among others.

There has been a considerable rise in demand for specialty chemicals in recent years, owing predominantly to the robust agricultural landscape, particularly in Asian nations such as China and India.

Rising demand for agrochemicals to mitigate instances of pest infestations

Despite a considerable impact on the economic landscape by the ongoing global crisis, significant growth in agricultural output is predicted in the near future. For instance, studies suggest that India is set to record food grain production of over 298.3 million tonne in 2020. This high output estimate will in turn stimulate demand for suitable industrial chemical products, especially agrochemicals in the years ahead.

Agrochemicals are a type of performance chemical, designed to safeguard crops against factors such as weeds and pests. 

These chemicals also enhance the nutrient composition of the soil, including phosphates and nitrogen, among others, to improve crop production. Agrochemicals, also known as agrichemicals, is a common term for specialty chemicals used for agricultural applications, to cater to the growth and safety considerations for crops and plants.

Agrochemicals are of various types, including pesticides, herbicides, insecticides, soil conditioners and fertilisers.

Pesticides and insecticides are gaining massive prominence, especially in recent times, as swarms of insects pose risks to crops in several prominent regions in Asia, especially northern and western India.

The recent swarms of locusts, brought on by strong westerly winds from the Cyclone Amphan, have emerged as a major threat to crop production across regions such as Uttar Pradesh, Madhya Pradesh,Rajasthan, Punjab, Haryana, Gujarat, Delhi, and Maharashtra.

This surge in pest attacks has in turn triggered a significant demand for agrochemicals. The specialty chemicals industry from the agrochemicals sector has registered immense growth in this scenario, with stocks of prominent agrochemical firms such as Bayer CropScience, Coromandel international, PI Industries, Insecticides India, and others witnessing considerable rush over the past few months. Furthermore, the demand and consumption of specialty chemicals are likely to expand as farmers are advised to utilize insecticides and pesticides on a larger scale, in an effort to stave off the prolonged impact of the locust swarms.

The outlook for specialty chemicals in the aftermath of the global Covid-19 crisis

The ongoing Corona virus pandemic has delivered a significant blow to the entire supply-demand ecosystem on a global scale. Containment measures such as lockdowns have also added to contractions in economic operations, which is likely to pose challenges to revival prospects in recent years.

However, despite its adverse impact on most industrial sectors, the pandemic has generated lucrative opportunities for the specialty chemicals industry. This is driven by various factors, including falling crude prices and growing domestic demand in countries such as India, among others. Also, the robust demand for key global industries to de-risk supply chains, by moving beyond China as their base, is likely to emerge as a key accelerator for the growth of performance chemicals in the current scenario.

Strict environmental mandates and rising labour costs have stifled the growth of the Chinese market, which typically contributes nearly 35-40% to the overall industrial chemical business space. This decline in competitiveness has paved the way for other nations like India to bolster their efforts in order to gain a larger market share. India’s inherent strengths in specialty chemical production, including enhanced compliance and manufacturing standard, low operating overhead costs, feedstock availability, stronger IP protection, skilled manpower, and more, contribute heavily towards positioning it as a suitable specialty chemical sourcing alternative. 

Key specialty industry participants, such as Galaxy Surfactants, which designs products for home and personal care use, as well as Fine Organics, are gaining vast prominence, owing to an upsurge in demand for hygiene-related products. Similarly, the rising prevalence of critical agricultural value chain, as well as healthcare is presenting lucrative opportunities to the agrochemical and pharmaceutical specialty chemicals business segments of SRF, PI Industries, and Aarti Industries in the present scenario.

Innovations in specialty chemical manufacturing are also underway, given rising environmental concerns in recent years. For instance, a startup affiliated with Purdue University, Gen3Bio Inc. has recently developed a technology that converts municipal wastewater algae into specialty chemicals. The company’s proprietary technology converts waste algae, which is generally disposed of in landfills and presents significant environmental hazards, into specialty chemical products that are ecologically friendly and profitable. These bio-based specialty chemicals include biodegradable plastics, aquaculture fish food, and succinic acid.