Covid-19 Impact: Chemical manufacturers brace for drop in revenues

Small and medium enterprises which are engaged in the manufacturing of chemicals are expected be hit hard as the industry braces for a decline in volume in the next fiscal year (2020-21), due to the outbreak of the Covid-19 pandemic.

   
Coronavirus sanitizer industry

According to reports, small and medium enterprises (SMEs) which are engaged in the manufacturing of chemicals are expected be hit hard as the industry braces for a decline in volume in the next fiscal year (2020-21), due to the outbreak of the Covid-19 pandemic.

As per reports, SMEs account for 30-35 per cent of the industry (in value terms), and are clustered around Gujarat, Maharashtra and the Delhi-NCR region. Gujarat alone houses over 400 chemical units. In calendar year 2020, the price of brent crude oil is expected average $35-40 per barrel, compared with $64 in calendar year 2019, as multiple headwinds coalesce, i.e. a global slowdown, output war between major crude oil producers, and demand contraction following coronavirus, to name some.

In fact, in the domestic market, the demand for chemicals is expected to slowdown in demand from key end-use industries such as automobiles, consumer durables, textiles and construction. Therefore, along with a decrease in volume, the SMEs are looking at a fall in realisations owing to lower prices of inputs such as crude oil, as the cost savings will have to be passed on to consumers.

Also, with recession hitting the world economy, exports are expected to take a hit, too. Thereby, the revenues of chemicals manufacturers are expected to decline in 2020-21.

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