There is no way that Indian chemical companies can escape from the global financial crisis. Tough times lie ahead as companies will be hit on all fronts – high cost of credit, falling demand as the global economy slows down and increased supply once new capacities in Asia and the Middle East get commissioned.
Product prices have fallen sharply in the last month. Ethylene is close to a 3-year low and benzene has fallen to $900/tonne fob Korea, a level last seen in January 2007. With buyers holding back purchases inventories are rising across the chain.
Companies are being hit in other ways too. One executive complains of expensive credit with international banks quoting Libor plus 900 basis points, up from Libor plus 100-200 basis points six months back. Indian banks are said to be quoting 18-20%, up from 9-11%.
International business is getting more difficult and riskier to transact as companies have to also deal with volatility in foreign exchange rates.
ICIS news reports that Indian base oils buyers and sellers of base oils are worried about the high level of credit scrutiny which is making an already difficult business environment even tougher.
“LC limits are frozen and there is no credit available for the love of money”, said a baseoils buyer.