Farm Inputs & Chemicals: Global Insights, Local Impact

29 Mar 2024 , 10:14 AM

Analysts of IIFL Capital Services global insights report scans through the voices from leading companies’ worldwide and highlights key insights that are relevant for the Indian Farm Inputs & Chemical companies. The year 2023 turned out to be very weak and compelled companies to drastic measure to limit impact. Commentaries by global companies suggest gradual recovery. USA is anticipated to lead in volume growth, while Brazil may still lag due to inventory imbalances. Europe is expected to stabilise on benign gas prices and improving purchasing power; uncertainty prevails on China.

Agrochemicals – expecting recovery from H2CY24:

Some of the leading agrochemicals are grappling with company-specific issues like Bayer (significant headwinds in glyphosate), FMC (patent expiry in largest product), BASF (costs pressure in Ludwigshafen); while others were hit by unprecedented destocking and excess supplies in CY2023. While things are expected to remain weak in H1CY24, most commentaries suggest recovery from H2CY24. While the US market seems to have largely done with destocking issues, the rest of the world, particularly Latin America, is still grappling with high channel inventories.

EU to stabilise while China remains uncertain:

BASF highlights that global growth in the Chemical industry was very weak in 2023 (+1.7%) and varied greatly from region to region. While the Chemical industry in China grew dynamically by 7.5%, it shrank by 3.9% in the rest of the world. It expects global chemical production to rise by 2.7% in 2024, as it expects EU to stabile and Asia to drive growth.

Global insights, local impact:

Near-term headwinds for global agrochemicals is likely to pose challenges for the companies having exposure to agchem exports (likes of SRF, Navin, Anupam, Astec, PI Inds). Solvay’s and Genesis Alkalies commentary on double-digit decline in soda ash pricing for 2024, does not augur well for Tata Chemicals. Kumho Petrochemicals commentary on weakness to persist in phenol, will keep spreads under check for Deepak Nitrite. Insights from Olin, Hanwha suggest weakness to prevail in caustic and PVC; which will hamper Chemplast Sanmar’s earnings. Israel Chemicals comments on ‘bottom is behind’ for bromine prices is seen as positive for Archean Chemicals.