Chemplast Sanmar Ltd, the specialty chemicals and PVC manufacturer, expects a challenging operating environment for its commodity businesses in FY27 amid geopolitical uncertainties, volatile raw material prices and continued pressure from low-priced imports, even as it remains optimistic about growth prospects in its specialty chemicals portfolio.
“The commencement of the war in the Middle East led to a chaotic situation in the prices and availability of both PVC and feedstock vinyl chloride monomer (VCM),” said Managing Director S. Ganeshkumar during the earnings call.
The conflict disrupted supplies of naphtha and ethylene, resulting in a sharp rise in VCM prices across Asia. While PVC prices initially moved in tandem, the trend proved short-lived as Chinese carbide-based PVC producers, largely insulated from the geopolitical disruptions, increased exports to India at aggressively low prices.
Commodity business under pressure
This resulted in a sharp disconnect between PVC and VCM prices, adversely impacting industry profitability.
The domestic industry had been expecting policy support through anti-dumping duties, higher customs duties or other import-control measures to counter the surge in low-priced imports, particularly from China. However, uncertainty continues to weigh on market sentiment.
“FY27, the commodity business, including CCVL, is expected to face a volatile near-term operating environment, driven by ongoing geopolitical developments, fluctuations in global raw material and energy prices, and continued uncertainty in international supply chains,” he said.
Despite the challenges, he noted that the conflict had delivered mixed outcomes. While prices and margins have improved, there have been some temporary concerns around demand due to the non-availability of LPG.
Specialty business outlook brighter
Chemplast remains more optimistic about its specialty chemicals business, where management expects stronger performance backed by better industry fundamentals and a robust order pipeline.
The Custom Manufactured Chemicals business reported healthy dispatches during the fourth quarter despite some orders being deferred to the current fiscal. While the segment continued to face headwinds from weakness in the global agrochemical market and pricing pressure from Chinese generic suppliers, the company sees early signs of recovery.
The company said its development pipeline continues to expand, with more than 45 molecules currently progressing through various stages of development. It is also strengthening customer engagement and business development efforts across global markets.
Expansion projects progressing
Chemplast recently commenced commercial production of R32 refrigerant gas at its 2,000-tonne swing plant in Mettur. Additional refrigerant gas facilities are expected to be commissioned in phases during the year.
The company said its focus in FY27 would remain on operational efficiency, cost optimisation, capacity utilisation improvements and timely execution of expansion projects, while continuing to strengthen its specialty chemicals portfolio to drive more stable and value-accretive growth.