5 Tips for beginners in Chemical trading business
Global market volume for chemicals will grow significantly in next two decades. The sales volumes have been estimated to be more than double in 2035 than what it is today. This is just the right time for beginners interested in chemical trading business to initiate their journey. In a country like India, chemical business is thriving and is going to get stronger in near future as we continue our endeavors towards rapid growth and development.
In general, the chemical market is very large and segmented – geographically as well as by product applications. Every beginner looking to start a new chemical company in India must first understand some basic dynamics pertaining to this industry. There are already so many companies and most of them are inter-linked or in some form of partnerships or joint ventures or sales agreements. It could be hard for new entrants to get a strong foothold initially. The following 5 tips may help beginners:
Optimal utilization of available assets
It is always advisable to manufacture few chemicals in-house for which you have competitive advantage. In case you do so, leverage your existing assets and manufacturing infrastructure to the fullest.
Chemicals trading business is characterized by low profit margins – around 5 to 8% for the most commonly traded chemicals. In order to survive, sustainability is the key. For a new entrant, it is important to go for reliable and sustainable sources for chemicals and raw materials. Identify global manufacturers and suppliers for chemicals that can give you cost advantage. For instance, China is among the top three producers of base chemicals. Importing base chemicals from China could be a very cost effective option of sourcing base chemicals for a new chemical company in India.
Value Added Services
In today’s fierce competition, it is important for every beginner to differentiate itself from the rest. Providing technical – commercial assistance, logistics and warehousing support, coordination for sampling, order approval and placement, shipments, etc could go a long way in differentiating a chemical trading company from others.
It is always advisable to start with few most ‘in-demand’ chemicals in the beginning. Gradually, newer regions and markets must be explored in order to widen your product portfolio.
In chemicals industry, there is a wide geographical gap between manufacturers and end users. Several factors hence have an impact over trade volumes, prices, shipping etc. As a result, one must be prepared to face contingencies. For instance, your supply chain should be flexible to allow sourcing from new suppliers, switching to alternative materials or using different delivery systems in case sudden need arises.
Keeping a close watch at the market and industry trends is also essential for ensuring long term growth and success.