Raw material shortages, price spikes and production pressure hit chemical manufacturers across India as imports from West Asia face disruptions

India’s chemical and petrochemical sector is facing mounting pressure following supply chain disruptions linked to the Iran conflict. Manufacturers dependent on imports from West Asia are reporting shortages of key raw materials, delayed shipments, and sharp increases in procurement costs.

The disruptions have affected a wide range of industries including packaging, paints, textiles, detergents, pharmaceuticals, FMCG, and specialty chemicals, with companies struggling to maintain production schedules and manage rising operational expenses.

India’s Chemical Industry Under Pressure

Prashant Mehra, who leads chemicals conglomerate SRF Ltd’s performance films and foil business, said the company had to source petrochemicals from alternative markets including West Asia, China, and Europe after the conflict disrupted supply chains.

“We bought raw materials from all over the world, as far as South America, at whatever price they were available, because we wanted to keep the plants running,” says Mehra. “We were lucky; many of our industry peers have had to shut their plants for want of raw materials.”

Ahmedabad-based Uday Chemical, which produces sulphur-based chemicals for the dyes and detergents sector, reported a steep increase in sulphur prices. “Our sulphur prices went double the price, while clients want to pay us after 120 days, as usual. How are we to run a business like this? I didn’t want to run into losses, so I have closed my factories for now,” says the owner, Udaybhai Krishna.

Import Dependency Creates Industry Stress

At another end of the country, Ash Enterprise, which imports polymers and other raw materials for the plastics sector, has been renegotiating supplier contracts as international prices surged.

Owner Gunjan Shah said procurement prices increased sharply after the conflict disrupted global supply chains. “Our suppliers have raised the prices. They called a force majeure, and all old contracts were cancelled. They raised prices to align with crude,” says Shah.

Industry participants noted that the last major disruption comparable to the current situation was during the 2008 financial crisis.

The Iran-Israel conflict has also intensified uncertainty around shipping routes and energy supply chains. Following attacks on energy infrastructure and crude supply disruptions, the United Arab Emirates (UAE) and Saudi Arabia increased output to stabilize markets.

MSMEs Face Production Risks

India imports a significant share of petrochemical feedstock and intermediate chemicals used across downstream industries. These materials are widely used in textiles, paints, plastics, detergents, pharmaceuticals, automotive components, and consumer goods manufacturing.

According to government think tank NITI Aayog’s projections cited in the report, India’s chemical sector was expected to grow from approximately $220 billion in 2023 to nearly $400-450 billion by 2030.

However, the supply disruption has exposed vulnerabilities in India’s manufacturing ecosystem, especially for micro, small and medium enterprises (MSMEs) operating in chemicals and plastics processing.

The Plastics Export Promotion Council (PLEXCONCIL) estimates that India has over 30,000 processing units, most of them MSMEs, dependent on imported raw materials and petrochemical derivatives.

Industry executives said rising freight rates, delayed cargo movement, and volatility in feedstock prices have reduced production visibility for manufacturers.

Petrochemical Imports Remain Critical

Data cited in the report showed that over 95% of products manufactured globally that require chemicals are derived from crude oil. India’s petrochemical consumption is projected to rise significantly in the coming years, increasing reliance on imported intermediates.

The report also highlighted that India’s chemical market consumption forecast could rise sharply across specialty chemicals, agrochemicals, paints, fertilizers, and petrochemical products by 2040.

Meanwhile, the government has announced emergency measures to stabilize supplies, including extending credit guarantees for MSMEs and allowing additional imports of propane, butane, and related feedstock materials.

Industry participants said the coming months remain critical as companies continue managing higher costs, raw material shortages, and uncertain global supply conditions.