India’s specialty chemicals sector showed signs of steady momentum in the third quarter of FY26, although gains were partly tempered by the full impact of US tariffs and weather-related disruptions.
Following a mixed first half, the December quarter benefited from improving domestic demand, volume growth and a softer input-cost environment. However, prolonged monsoons — after erratic rainfall in the previous quarter — continued to weigh on parts of the agrochemical value chain.
Agrochemical exports were marginally higher year-on-year, supported by a gradual normalisation of channel inventories. Even so, tariff pressures and customer order deferments limited the pace of recovery. Globally, both the United States and Europe remained affected by trade-related headwinds, while China’s recovery is still unfolding, keeping overall sentiment cautious.
Industry executives say the operating environment is stabilising but remains uneven. Inventory de-stocking is largely nearing completion across most categories, helping volumes improve for many specialty chemical companies in the quarter. Yet pricing pressure persists, particularly in agrochemicals where excess capacity and low commodity prices continue to cap realisations.
Lower crude prices led to some correction in petrochemical and monomer prices, while specialty chemical pricing remained broadly stable. In several cases, softer input costs supported margin improvement. Logistics expenses also stabilised in the third quarter after earlier volatility driven by geopolitical disruptions.
Export demand showed sequential improvement across both specialty chemicals and agrochemicals, though companies noted that US tariffs continue to delay some customer decisions. Management teams expect the interim India–US trade engagement and the proposed India–EU free trade agreement to gradually improve business visibility, with more meaningful benefits likely from FY27 onwards.
Within segments, fluorochemicals saw firm realisations in key gases such as R32, while the CRAMS/CDMO business reported better volumes but muted pricing.
Analysts remain cautiously optimistic, expecting a gradual sector recovery with moderate pricing improvement after the Chinese New Year in February 2026 and a more visible upcycle beginning FY27.
