Chemical Industry Posts Steady Quarter With Visible Demand Recovery – Q2 FY26 Analysis

The chemical sector delivered a stable and encouraging performance in Q2 FY26, supported by improving demand trends, stable raw-material prices, and a gradual recovery across key end-use industries. The quarter reflected resilience despite global uncertainties, with companies maintaining healthy margins and disciplined inventory management.

Stronger Financial Performance in Q2 FY26

The industry reported broad-based improvement across key metrics:

• Revenue grew 9% YoY, signalling a recovering consumption environment.
  
  
• EBITDA rose 15% YoY, aided by softer raw-material costs and stronger cost optimisation.
  
  
• PAT surged 21% YoY, reflecting improved profitability and operational efficiency.
  
  

Companies maintained inventory levels similar to Q1, indicating balanced supply management and avoiding overstocking amid cautiously improving demand.

Demand Recovery in Key Segments

Two segments led the momentum this quarter:

1. Specialty Chemicals

Speciality chemical manufacturers benefited from:

• Revival in global customer orders
  
  
• Higher utilisation levels
  
  
• Continued import substitution demand in domestic markets
  
  

2. Fluorochemicals

This segment witnessed:

• Strong traction from industrial and agrochemical applications
  
  
• Gradual recovery in export orders, especially from the US and EU markets
  
  

The combination of recovering demand and steady pricing supported consistent growth visibility.

Supportive Global Macro Environment

Macro indicators also played a critical role in stabilising the sector:

• China’s demand revival is early but visible, supporting export-oriented chemical players.
  
  
• Latin America’s agricultural normalisation boosted demand for agro-linked chemical products.
  
  
• Stable raw-material prices, especially crude derivatives, enabled predictable cost structures for manufacturers.
  
  

These factors collectively helped chemical companies deliver consistent performance despite global volatility.

Margins Remain Resilient

Profitability metrics across the sector remained healthy:

• EBITDA margin improved due to better cost controls and supply-chain efficiencies.
  
  
• PAT margin rose sharply as companies focused on a premium product mix and rationalised overheads.
  
  

The stability in margins reflects the structural strength of the sector, supported by long-term contracts, diversified portfolios, and strong customer relationships.

Outlook for the Coming Quarters

While the near-term uptick in demand is gradual, the overall outlook remains positive due to:

• Stable cost environment
  
  
• Improving global macros
  
  
• Supportive demand in speciality and export-driven categories
  
  
• Strengthening order pipelines
  
  

If macro conditions continue to improve, utilisation levels across the industry may rise further, enhancing revenue visibility and margin stability.