Opportunities to Buy at Bargain Chemical Prices Rise as Rupee Falls

by Brian J. McCormick, guest columnist

Our search for “The New Cheap”*, which took us to China in August and South Korea in September, now leads us to India, where declines in the value of the rupee against the US dollar should set the stage for attractively priced Indian exports.

Chemcost’s survey of the lowest chemical prices in Indian and US trade year to-date for the basket of 10 commodities used in the Datamyne US Best Price Benchmark (published each month on the Datamyne homepage) yields the results summarized in Chart 1.

Note that “the new cheap” in India is fairly well divided between exports and imports (in contrast with previous months’ findings in China, South Korea and the US, where imports drove lower prices).

Chart 1 The New Cheap Best India Chemical PricesSome additional observations:

  • If you are in the market for inorganic chemicals, metals or biofuels, Asia – including India, South Korea and China – still offers prices that can yield cost savings.
  • If you use non-Datamyne trade intelligence websites – that is, US-centric trade data only – to identify chemical price opportunities in the US, you would miss 5 of the 10 lowest price benchmarks from India. Missed opportunities would include unconstrained cost reductions of up to 99% over best US prices found in Chart 1.
  • For the US basket of 10 commodities, lowest price benchmarks are roughly 90% outside the US. To realize best chemical prices in the US, customers must look to global norms.
  • Cost opportunity due to rupee volatility may be short-term only – get moving now on “the new cheap”.

Our second survey is guided by the premise that, in an open trade environment, high-volume, long-term customers are likely negotiating the lowest global chemical prices.

To test this theory for India and the US, we’ve assembled the 2013 trade volumes in kilotons (kt), with the volumes associated with best prices highlighted, here in Chart 2:

Chart 2 The New Cheap - Comparison of US, India Chemical Trade Volumes

Chart 2 supports the observation that trade in these industrial chemical sectors is evolving towards Asia.

In last month’s look at South Korea, Chemcost found sodium silicate was a good barometer of low chemical prices. This month, we apply the barometer to India, where silicates trade is a core industry.

Here are the critical sodium silicate trade figures for India and US to-date for 2013:

Chart 3 The New Cheap - Comparison of US, India Trade in Sodium SilicatesFor sodium silicates, lower prices prevail in Asia – including exports from India where average prices are $438/mt less or 62% lower!

  • Lower prices in India theoretically mean local precipitated silica producers might be able to produce and export various precipitated silica grades at up to a $438 feedstock price/mt advantage over comparative US average prices to customers.
  • The $438/mt Indian price advantage is causative to comparable export volumes in the US and India, even though the Indian silicates market is smaller than the US.

Copyright © 2013 Chemcost Interactive, LLC


About Brian J. McCormick

Brian J. McCormick, ChemcostBrian J. McCormick was instrumental in developing procurement costing and quality assurance for P&G over a 34-year career. He is the founder and managing director of Chemcost Interactive* LLC (CI), a company offering research and analysis to support cost-efficient supply chain management.

Chemcost can assist Datamyne’s customers in identifying lower price opportunities through consulting and training. Chemcost also offers annual subscriptions to global and regional price bulletins on 225 commodities across 8 major chemical spend classes. Learn more and contact Chemcost at www.chemcostinteractive.com

The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.

* Chemcost Interactive and The New Cheap are trademarks of Chemcost Interactive LLC

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