Amid fluctuating price trends in the chemicals industry in May and early June, analysts are observing significant shifts among key market players. Benzene prices spiked substantially, while propylene, acetone, and phenol prices were relatively stable.
This disparity led to a 16% drop in phenol-acetone spreads, prompting companies like Deepak Nitrite to pivot towards increased isopropyl alcohol (IPA) sales, capitalising on more favourable IPA realisation rates.
“Benzene prices have surged by about 5% month-on-month (MoM), impacting major chemical producers such as Deepak Nitrite, Aarti Industries, and Atul,” noted Krishan Parwani and Siddhinathan KN, equity research analysts at JM Financial, an investment banking firm.
Toluene prices followed suit with an approximate 4% MoM increase, further influencing these companies. Despite stable acetone and phenol prices, the unchanged propylene prices contributed to the decline in phenol-acetone spreads.
Polycarbonate (PC) prices, a key indicator for phenol pricing, remained flat MoM but saw a 2% increase quarter-on-quarter (QoQ). Industry reports indicate a decline in PC consumption in China, with supply levels remaining high and capacity utilisation at around 76%. “PC demand is expected to stay muted in the short term, delaying a price rebound. However, the recent PC price uptick suggests a potential future increase in phenol prices,” Parwani and Siddhinathan KN highlighted.
Bromine prices exhibited stability, rising by 3% MoM but dropping by 1% QoQ due to weak downstream product demand, with spot prices at $3.1 per kg. The analysts noted ongoing challenges for companies like Archean due to continued weak demand and pricing.
The refrigerant gas market experienced mixed trends, with domestic prices for R32 and R410A rising by 5% and 18% QoQ, respectively, while R134A prices fell by 5% in the first quarter of FY25. Conversely, the US market saw downward trends for R32 and R125, with declines of 6% and 23% QoQ, respectively, while R134A prices remained flat. “Increased demand from domestic and Middle Eastern markets is expected to enhance the overall refrigerant gas pricing environment, benefiting companies like SRF,” said Parwani and Siddhinathan KN.
Additionally, the ethyl acetate-acetic acid spreads witnessed a slight dip of 1% MoM due to minor declines in both ethyl acetate and acetic acid prices. An impending increase in acetic acid prices in July 2024 could further pressure companies like GNFC and Laxmi Organics. Polyvinyl chloride (PVC) prices in early June 2024 saw a rise of approximately 3% MoM, while ethylene dichloride prices decreased by 4% MoM. “This trend is likely to result in a sequential increase in PVC spreads,” the analysts added, highlighting Chemplast Sanmar and Reliance Industries (RIL) as key PVC manufacturers in India.
In light of the current market dynamics, JM Financial has recommended SRF in the large-cap category, Deepak Nitrite in mid-cap, and PCBL in small-cap as top picks for investors.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
