The prospects for chemical industries continue to remain challenging.
Rising cost of raw material and energy is a big issue facing the chemical industries all over the world. The merger and acquisitions and consolidation of strength by major international producers could make it extremely difficult for several chemical industries in India to survive, which are presently operating in isolation.
There have been enormous efforts on the part of the chemical industries all over the world in recent times to reduce the cost of operation and optimize the cost parameters in whatever way possible for them. Many organizations are willing to shift the production base to developing countries or any other region, if it would lead to competitive cost of production. Many companies are willing to shift production centres to regions where demand exist, instead of transporting the product over long distance at prohibitive freight cost to reach the end consumers.
Custom manufacturing practices are growing quickly . Make or buy decision is becoming extremely critical for the producers to ensure the profitability and cost competitiveness.
Several big chemical and pharma producers in developed countries with strong research and development capability and marketing network are seriously considering plans to shift the manufacturing activity to the customs synthesis units to improve the profitability. This means that in future several of such companies may look upon the manufacturing activity as a non core activity for them.
Since profit is the greatest motive, asking someone else to make the product and confining themselves to be the suppliers of technology and formulation details and buyers of the product that would be custom made for them and retaining the marketing functions can be found to be very attractive by several producers in future, when it would lead to greater profitability. The big companies could shrink in size and would expand in profits and rate of returns.
Global chemical industries are clearly getting ready for such big changes. Such changes would involve reducing both the cost and investment level in manufacturing activities and in the supply chain.
It has now become absolutely necessary for the Indian chemical industries, whether big, medium or small to reposition themselves to exploit the opportunities due to such fast changing approach of the chemical industries players around the world.
The Indian units have to necessarily cultivate a global mindset and keep themselves well informed about the international developments, at least in their sphere of activities. In the present fluctuating conditions, sudden rise or fall in the global prices of commodities and shifting of the production from one region to another in the case of fine and speciality chemicals are the factors that have to be confronted in the day today management. It is imperative that the industries have to take some special steps to keep themselves posted with information and be informed about the opportunities.
While in the case of bulk chemicals and building blocks such as ethylene, propylene etc. and mineral based products such as titanium dioxide and others, shifting of the production facilities from one region to another in quick time would not be possible, in the case of derivative products , speciality chemicals and intermediates, this is bound to happen.
Particularly in the case of medium and small units, if they would maintain globally acceptable standards in shop floor practices, quality control programmes and in getting the facilities certified internationally, the opportunities for growth and improved profits would be enormous by readying themselves to function as custom synthesis units. It is gratifying that some units in India have already well positioned themselves to reap the rewards. But, unfortunately, many others have not been able to do so and such of them may well face difficult problems in the near future.
Several global organizations are now known to outsource even the research and development work, particularly to countries like India where there is large pool of technical manpower. The chain of CSIR laboratories , with huge infrastructure and facilities and considerable technical manpower are yet to exploit such opportunities. While a handful of research laboratories have been moving ahead in this direction, many others appear to be unaware of the opportunities or unequal to the tasks. They have to quickly reorient themselves.
The academic institutions in India, including IITs are yet to make a mark in the international arena about their R&D capabilities to exploit R&D outsourcing business opportunities.
It certainly has a big space to exploit in the case of derivatives, intermediates and speciality chemicals. All that is required is a positive and aggressive attitude and a mindset that is in tune with the global thinking.
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