Specialty Chemicals Likely to Outperform Commodity Peers in 2021

As per a recent analysis by Fitch, the US credit rating agency, market players engaged in specialty chemicals production are perceived to observe a better revival in 2021 than those engaged in petrochemicals on the back of the auspicious shift in the demand patterns. Viable increment in energy and feedstock prices in 2021 is likely to brace the overall margins of the chemical sector but it will not be enough to bring them back to pre-pandemic levels. Although oil was the worst hit commodity in 2020, 44 percent of global energy executives have anticipated a promising rebound in 2021 whereas 33 percent have expressed concerns over a new supply crunch in the forecasted years.

However, large scale capacity additions due in the petrochemical sector are likely to dwindle the leverage of market players despite improved financials. Revival will also vary based on the end-markets, chemicals being channelized into automobile and consumer durables are expected to witness a boom while those going into the healthcare and packaging industry will comparatively follow a slower suit due to high base effect in the year 2020. Specialty chemicals have marked better foundation than its commodity peers due to its diversified and high yielding end markets such as pharmaceuticals and agriculture. Compounds being directed into cleaning and pharmaceutical applications have showcased a steep climb since Q2 of 2020 and are likely to follow a similar trend in 2021. Players have opportunistically coped with the demand shift and volatile pricing in the global market and have thus fetched considerable gains to manage their capex towards the new year. Market players in the specialty chemicals industry are perceived to indulge into new investments, research, and capacity additions in line with the promising demand pattern.

As per ChemAnalyst,“ Although sharp rebound in market activities will assure considerable revenues, with leading Asian economies like China and India leaned on attaining self-sufficiency, the export potential of Middle East, European and African countries is likely to adhere a marginal slump in 2021."