The business of fine chemicals is one where India has carved a reasonably competitive position, both locally and in global markets. The industry plays to the country’s strengths in chemistry and procedure engineering, even as now not exposing weaknesses that plagues the majority chemicals industry, significantly the lack of access to cheap – energy and feedstock. The apparently irreversible trend (till recently) to outsourcing manufacturing of fine chemicals by western world has been a boon to the profitable increase of the industry here and caused a significant boost of capacity for a ton of products.
But changes are afoot in the way in which fine chemicals are made and, more currently, in their markets. The new-determined need for great self-reliance in important value chains that feed specially to the pharmaceutical industry isn’t just restrained to India. Major economies – the US, Japan and the European Union (EU), in particular – are worried over supply chain risks and are installing in place measures for localization, near-shoring or friend-shoring the production of essential inputs.
All of these could have an effect on the fine chemical industry right here.
Fine vs speciality vs commodity chemicals
Fine chemicals are chemicals normally produced to a specification (usually a high level of purity), in batch procedures where multi-step variations are sequentially performed. These chemicals serve as inputs to numerous industrial sectors – pharmaceuticals, agrochemicals, flavours & fragrances, food & beverage, cosmetics, nutraceuticals, coatings, and many others. Fine chemicals vary from speciality chemicals in that the latter are frequently formulated products intended to serve a functionality and are sold for what they ‘do’ in an end-use, now not a lot for what they ‘are.’ Both phrases are used liberally and exchangeable but imply different things. There is also an inclination to classify almost the everything a speciality because it strikes a notice of uniqueness and high margins, which can be some distance from the reality. In fact, in the world of rapid commoditization of products, true specialities are a rarity!
Fine chemicals are frequently bought to speciality chemical enterprise, which includes drug producers, who prepare these bought ingredients with other inputs, and sell to clients.
Fine chemicals are commonly pricier than commodity chemicals – selling upward of $15 per kg – and the economics of their manufacturing, most usually in multi-purpose plants (MPPs), is less stimulated by factors such as scale of producing and raw material pricing (although both matter to some). This is not like commodity chemicals, which might be made in committed, continuous plants, in which larger is better, and with margins closely depending on access to reasonably-priced raw materials (currently in most hydrocarbon based). Operationally, the focus point by way of fine chemical producers is on the efficient and seamless orchestration of chemistry and chemical engineering. In big chemicals, alternatively, the highlight is a good deal more on engineering aspects with the chemistries generally less complicated and properly understood. Notwithstanding these variations, there may be scope for innovation in both – incremental and fundamental.
The emergence of the business of fine chemicals
The arrival of the fine chemicals enterprise as a different entity may be defined to the second half of the 1970s, when a huge pharmaceutical enterprise resorted to outsourcing a main intermediate for the active pharmaceutical ingredient (API), cimetidine (an anti-ulcer drug), to a fine chemical enterprise in Switzerland, to make up for the lack of sufficient in-residence production functionality. While in 1993 the fine chemical enterprise had sales of about $42-bn, this grew to $128-bn in 2014, and to approximately $285-bn in 2024. The pharmaceutical industry stays the biggest client of the fine chemical industry nowadays, accounting for approximately 69% of the latter’s revenues, followed with the aid of agrochemicals (10%), flavours & fragrances (7%), food additives (4%), dyes & pigments (3%), and others (7%).
Manufacture of fine chemicals – the migration to Asia
As referred to in advance, fine chemicals are commonly made in MPPs, usually consisting of stirred stainless steel reactors and glass-lined reactors, with related paraphernalia. As per with a latest paper (DOI: 10.1021/acs.Oprd.Fc00010), the unit cost for a completely mounted reactor in a MPP in Europe, North America or Japan, in 2010 became $1-mn/m3, in comparison to $1-mn/m3 in India or China. The ten-fold differential was one of the motives for the eastwards shift of the fine chemical industry.
The other elements that led to the hollowing out of fine chemical manufacturing within the western world have been the more and more tight environmental guidelines there. Fine chemical manufacture comes with a massive environmental footprint, as it created copious quantities of waste. The ‘E-element’ (the quantity of waste generated per kg of favored product) of the industry has been estimated at round 50, in general, going beyond a 100 for APIs. This is a result of numerous unchanged phrases of the industry, considerably use of old fashioned batch reactors which have undergone little fundamental change, as well as stoichiometric quantities of specifically inorganic reagents in the shape of oxidants, reductants, acids, and bases. The costs related with treating and dumbing these wastes hastily approached the selling charge of the product, turning the economics unviable, and forcing enterprises to outsource manufacturing.
While the evolved triad of Western Europe, US and Japan manufactured 90% of the APIs required in the mid-1990s, by 2017, China alone accounted for 40%, as more and more manufacturing came to be offshored, especially common APIs. In 2019, the top-10 fine chemical enterprise of the sector protected two from China, with numerous from India near getting into the list. Today, the industry’s structure spans a few very big enterprise (top-10 having annual sales of $0.5-1.5-bn), numerous mid-sized ones ($100-500 mn), and hundreds extra (mostly in China and India) with annual sales underneath $100-mn. The remaining lot have been at the beginning (when outsourcing begin) focused on area of interest/hazardous chemistries which includes cyanation, phosgenation, ethoxylation, halogenation, ozonation, hydrogenation, and many others., but have due to the fact broadened offerings. Besides, the largest of the fine chemical enterprises centered in Europe and the US had one or more plants operating in China.
Technology shifts
Three important manufacturing technology shifts are ongoing in the industry: the industrial use of bio-catalysis and improved chemical catalysis; the shift toward continuous production (CM); and the usage of digital technologies for process layout and method control.
Biocatalysis – including to use of enzymes – is arguably the most fundamental technological change ongoing and is allowing more efficient, selective, and environmentally-pleasant manufacturing of fine chemicals, consisting of complex chiral motifs. The breadth of the biocatalysis toolbox keeps on growing because of academic developments, main commercial-academic collaborations, and in-residence enzyme discovery efforts. One of the more current competencies, now carried out on scale, is the aggregate of more than one enzyme-catalyzed steps in a one-pot, heading off the need for time-consuming, material-intensive, and costly isolation procedures, and so greatly decreasing waste generation.
Continuous producing made its entry into the fine chemicals industry about 20 years ago for the production of patented drugs within the advanced world. This shift got here with numerous advantages over the legacy batch approaches: smaller plant footprint; reduced waste generation; energy-efficient operations; decrease capital & operating expenses, etc. Real-time looking out and control of process parameters, facilitated by way of Process Analytical Technology (PAT),allowed extra steady and high-quality products. By the early 2020s, CM got here to be adopted for the production of general APIs and agrochemicals, inclusive of in India. Challenges to its wider adoption here include significant upfront cost; and need for a skilled team to design, operate and hold these plant plants.
Indigenous efforts to expand advanced micro-reactor technologies had been taken up in India, which must cause them to more low-priced to small and mid-size enterprises, and at the least one publicly-funded industrial research laboratory is now targeted on upgrading the skill-base to function these sophisticated plants and widen the regions of application.
Digital process design and procedure control technology such as ‘digital twins’ has moved beyond the petrochemical and basic chemical industries, and gaining traction in fine chemicals for process design and optimization. With well-evolved IT infrastructure, India is specifically well positioned to leverage this technology.
The drive to self-sufficiency
The disruptions caused by Covid to supply chains in crucial regions (as medicines) has pressured a reconsider at the emptying out of fine chemical production in the western world. In the US, Japan and EU there’s these days highlight on improving the safety of these vital supplies. Even before the tariff measures have been put in region within the US and others (in reaction), there were numerous policy steps taken to localize manufacturing, and/or decrease dependence on single source of supply (which, more often than not, is China).
The US, for one, is focused on to reshore manufacturing of 25% of small molecule APIs. In Germany new rules is giving options for APIs produced in the country or the EU. In Japan, the administration is helping measures such as subsidies and buy options to bring back local manufacture of antibiotics, which had all however ceased. India’s Production Linked Incentive (PLI) scheme is aiding the creation of new capacity for basic antibiotics and for some crucial intermediates largely met by imports now.
How much of a manufacturing renaissance will be seen in the markets that India’s fine chemical industry now caters stays to be visible. Tariff and non-tariff limitations are a new truth, and the era of globalization is in reality over. Bilateral arrangements – numerous of which might be being mentioned with trade partners – will in all likelihood take its place however won’t make up completely for the opportunities that the open-trade era that prevailed for well over 3 decades afforded.
The fine chemicals industry, like many others, is coming into unchartered waters, with a whole lot of the challenges beforehand coming from factors nicely beyond its control. The best it may do is focus on ramping up technological capabilities, manufacturing excellence and broaden portfolios to better serve the desires of users industries.
