Chemicals Sector Check - Some Respite In Pricing Pressures: IDBI Capital

IDBI Capital Report

The consistent fall in chemical prices was arrested to some extent in July. Most of the management commentaries do point to slow global demand offtake and significant channel destocking especially in the agrochemical segment.

China has been aggressively entering various segments and impacting them by steep pricing and volume dumping. We expect pricing pressures to sustain for commodity chemicals with Chinese resurgence.

However, realignment in the global supply chain to diversify from China and strong interest from global MNCs to source from India bode favorably for the Indian chemical sector.

Companies with long term contracts which have price variation clauses embedded in them will fare better owing to better revenue visibility and margin protection.

Companies who are higher up the specialty chemicals value chain stand to perform better in the current environment.

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