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Rating agency Icra has said that it has revised the outlook on the petrochemicals and basic chemicals industries to negative from stable due to weak demand and global supply glut. It said that the petrochemical and basic chemicals industries are likely to face pressure on operating rates and profitability.

Further, it stated outlook on specialty chemicals remains stable, with profitability expected to moderate in FY2024, but not trigger an outlook change at this stage. According to Prashant Vasisht, senior vice president and co-group head of corporate ratings, Icra, tepid global growth and inflationary pressures in major chemical-consuming nations are exerting pressure on the global demand of a host of chemicals and thus, volume growth for these chemicals is expected to slow down in the near term.

Moreover, he said sizable capacity expansions over 2022 to 2024, are expected to weigh on the operating rates and would result in a supply overhang, which is likely to keep the spreads and margins under pressure in the next 2-3 years. While domestic demand is likely to remain healthy, dumping of excess output by large overseas producers is likely to keep profitability under pressure.