Increased enter prices more likely to erode chemical firms’ income

ET Intelligence Group: Escalating US-Iran battle threatens to erode the profitability of Indian chemical producers as surging crude oil costs drive up enter prices and delivery delays add stress on operations. India imports greater than two-thirds of its methanol requirement, a significant feedstock, from the Gulf nations. Methanol is used to make industrial intermediates comparable to formaldehyde, acetic acid, amines, and solvents. The provision disruption, subsequently, has raised the danger of upper enter prices.

India stays uncovered to this battle as a result of its dependency on Gulf nations and West Asia for its fertilisers and numerous petrochemicals. The nation imported $3.6 billion value of petroleum merchandise (together with LPG, Naphtha), $1.8 billion of polymers, and $1.7 billion of nitrogenous fertilisers from the GCC (Gulf Cooperation Council) and West Asia in FY25, based on Kotak Institutional Equities.

For many commodity chemical firms, uncooked materials and solvent prices are tied to crude-linked derivatives comparable to naphtha, ethylene, benzene, propylene, methanol, styrene and vinyl chloride monomer. When crude oil costs rise, these feedstocks additionally grow to be costlier. Brent crude has jumped practically 74% in 2026 to this point.

Corporations comparable to Deepak Nitrite, Finolex Industries, DCM Shriram, Supreme Petrochem, Styrenix, LG Polymers, GNFC, Balaji Amines, RCF, Chemplast Sanmar, Aarti Industries and Atul are anticipated to be impacted.

Rising tensions have additionally heightened dangers throughout Gulf delivery routes, inflicting delays in consignments. Rerouting not solely drives freight prices up but in addition provides war-risk insurance coverage premiums, pushing up working capital wants for chemical firms.

Based on ICICI Direct, a protracted geopolitical logjam might result in greater uncooked materials and freight costs, which lead to margin compression given the restricted skill to cross prices to clients in a difficult surroundings.
Based on Emkay World Monetary Providers, main Asian refiners are rationalising present output and will in all probability run at 20-30% decrease manufacturing ranges if the present state of affairs persists. The fertiliser business faces a double blow of tightening provides of ammonia, DAP, and urea from the Gulf nations and the suspension of LNG output from Qatar. India depends on imports for practically half of its LNG wants. With ammonia being a vital feedstock for fertilisers, provide constraints might affect agrochemical producers, together with Chambal Fertilisers, Deepak Fertilisers, and Gujarat Narmada Valley Fertilizers (GNFC).