InvestorQ : What is the reason that specialty chemicals companies have done very well in the last few months and are there any specific specialty chemicals companies to buy?
Juvina Maggie made post

What is the reason that specialty chemicals companies have done very well in the last few months and are there any specific specialty chemicals companies to buy?

Answer
image
Angel dcosta answered.
2 years ago
Follow

One of the major determinants of the profits of speciality chemicals companies is the price of crude because crude oil is an important input for specialty chemical companies. In the recent past, crude has fallen from $75/bbl to $60/bbl and that has immensely benefited the specialty chemicals business. There are also big opportunities for the specialty chemicals business than are opening up in the domestic market and in the global export market. The total demand for chemicals in India is nearly $200 billion and out of that nearly $70 billion is accounted for by specialty chemicals. Many of the specialty chemicals have benefited from the huge investments that they have made in the last few years especially in technologies that can bring renewable low cost and low carbon energy to consumers.

There are two reasons why the specialty chemicals companies are in a very sweet spot today. Firstly, the demand is growing and especially in countries like Latin America and Africa the demand is immense. That opens up a huge market. Secondly, China is still the world’s largest producer of specialty chemicals. However, in the last few quarters, China has shut down many of its specialty chemicals plants due to environmental degradation concerns. This has left a huge supply and India is best equipped to fill up this gap. Additionally, the EOU scheme of the government for pushing exports is also likely to help the specialty chemicals companies in a big way. These specialty chemical companies have seeing double digit profit growth in the last many quarters and that trend is likely to continue in the coming years too.

In terms of specific companies, you can look out for companies like Tata Chemicals, Himadri Chemicals, Vinati Organics, Aarti Organics, which are high quality profitable companies operating in India.

6 Views