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Chemicals Monthly Update – February 2024

Chemical Market Trends: Navigating Challenges and Opportunities

In February 2024, the chemical market showed signs of recovery, with most prices rising across different segments. The Chinese New Year played a role in this, as China sold products at lower rates, affecting prices in India and Europe. Meanwhile, the Red Sea crisis caused delays in shipments to the US and Europe, leading to increased freight costs and rescheduled orders.

Inventory levels in the global chemical industry are starting to normalise, indicating a shift towards stability. Production reports from Europe and the US suggest a reduction in inventory destocking and a decrease in Chinese dumping. However, consistent improvements are needed to confirm a global recovery. Despite China’s dumping, the industry expects inventory destocking to end soon.

Despite challenges, the chemical industry remains optimistic. Indian companies are well-positioned to capitalise on domestic and global opportunities. With supply constraints and higher input costs expected to normalise, most chemical companies should perform better from Q1FY25. Crude prices have been stable, and demand from sectors like dyes and pigments is starting to recover, keeping the long-term outlook positive.

In terms of pricing trends, soda ash spot prices in China have corrected after a short spike, while import prices into India remain weak. Prices of benzene, ethanol, and aniline have increased, while acetone and acetic acid prices have decreased. Phenol prices have modestly recovered, and in the refrigerant category, R-134a prices have increased, while R-32 prices have softened. Overall, most chemical prices have stabilised for now.

Companies like Aarti Industries, Archean Ltd., Bodal Chemical, Deepak Nitrite, Laxmi Organics, Sudarshan Chemical, and Tata Chemical could benefit from supply disruptions in the Red Sea. Specialty chemical companies like SRF and Navin Fluorine are likely to gain from a long-term perspective. The commodity chemicals segment may see traction as sectors like dyes and pigments recover. Moreover, many chemical companies are investing in backward integration and shifting their product mix towards value-added products. Those focusing on value-added products and moving up the value chain are expected to outperform in the long run.

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