Indian specialty chemical industry shivers with dollar rise

Indian specialty chemical industry shivers with dollar rise

12:05 PM, 7th May 2012
Indian specialty chemical industry shivers with dollar rise
Indian specialty chemical industry faces impact of dollar rate rise against the rupee.

SINGAPORE: The rise of the dollar against the rupee from Rs 50 to Rs 53.85 has led to a sudden slug in the Indian specialty chemical industry. Adding to the woes, chances are that the rates will further increase upto Rs 55 in the next 2 to 3 months. The other worry for the industry is the weakening of the rupee against other country currencies such as Euro, Yen, Australian dollar to name a few.

Manufacturers (importer of raw materials) and traders are facing the brunt as their orders are fixed and come under pre booked contracts. Many of these firms have noted that clients prefer to ‘wait and watch,’ rather than procure the chemicals. Revision of the purchase rates is also not a possibility, report clients - another hassle that the industry is witnessing.

“The dollar rise is definitely impacting all our business segments. It becomes difficult to convince clients during such uncertain times. Majorly we will see loss of business of smaller firms. Large corporate organizations will not feel the pinch, as their bookings are regular and consists of long term contracts. Also we feel that in 2 to 3 months the dollar value will settle at Rs 55,” said Milan Shah, CEO, Surya Corporation - a trading, exporting, importing company. “It is the common man who will bear the brunt of this dollar rise. Prices of all commodities and fuel will also rise if the RBI does not intervene,” added Shah.

On the other hand, Dinesh Gandhi, Director, Ultima Chemicals sees hope for stabilization of the dollar value. “Overall businesses will suffer as clients postpone booking orders. Even with the dollar rate at Rs 50 it is diffcult to achieve margins, Rs 53 will make it tough furthermore. Considering the industry view and past experience, it seems the dollar rate will reduce and stabilize at Rs 51 to Rs 52,” said Gandhi.

Some of the niche segments within the specialty chemical industry have been badly affected while others are not significantly impacted. For instance there is a huge demand for plastic raw material and paints in the country. With raw material imports getting expensive this segment is in a shivering mode. Some of the other segments seeing impact are petrochemicals, acrylic based chemicals, esters, biochemicals, biocides, polymers, rare earth metals and special agrochemicals. The water treatment chemicals remains somewhat insulated by the dollar rise.

“The dollar rise has definitely affected the Indian speciality chemical industry as it directly relates to imported material. And we have major imports for this industry. As long as the Iran crisis remains and things are driven politically, the pricing issue will continue. Most of the oil-based industries, textile specialty chemicals, paint specialty chemicals etc have been affected,” said Dr Kishore M Shah, President, Indian Speciality Chemical Manufacturers’ Association (ISCMA).

“India is a major import dependent country for specialty chemicals. The dollar rise will definitely impact the industry. Companies will first try and source raw materials from the local market. Eventually they will look at a forward cover to protect themselves. The automotive, paint industries will find themselves in the worst position. Since the issue is global, one cannot predict the dollar trends,” said a person from the Marketing Department, BASF.

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