Specialty Chemicals – Price Trend Sep-20 – ICICI Securities
The fulfillment of R-22 exports fell to Rs 174 on September 20, which is the lowest price since February 18, and this despite the phase-down 2, which reduced production by 25% from the line base from Jan 1, 2020. R -22 export volumes only declined by 16.9%, meaning next quarter could see a sharp drop in export volumes to meet guidelines. Although the spreads for BOPET-PTA / MEG and BOPP-PP were strong in T2FY21, they started to crack in September 20 with a decline of 3.3% and 8.3% MoM, respectively. Lauryl alcohol prices fell 5.5% QoQ, meaning that the gross profit margin expansion has a very limited contribution from the commodity price movement, as investors suspect. Pigment volumes picked up in a smart way with a decrease of just 0.7% year-on-year in Q2FY21.
(Note: All prices shown are in Rs / kg)
SRF Ltd: production of R-22 under pressure; BOPET spread plunges into exit-T2FY21
– R-22 prices drop 7.8% QoQ and 2.5% YoY to Rs185 at T2FY21, but as of September 20, realization was down 10.3% YoY to Rs174. Export volumes fell 29% to 4.919te in Q2FY21. Reduction Phase 2 was likely to hurt volumes by 25%, but in nine months, R-22 export volumes were only down 16.9%. We therefore also anticipate a sharp drop in volumes in Q3FY21. The price of fluorspar (acid spar) is down 3.3% QoQ / 8.2% YoY to Rs30. The spread of R-22 (fluorspar and chloroform) was Rs117 versus Rs123 at T1FY21. The spread was only Rs110 as of September 20.
– MDC (Methylene Chloride) prices have decreased by 4.7% QoQ / 17.3% YoY to Rs33. It is also due to the fall in the prices of chlorine and methanol. We note that MDC spreads should have improved QoQ.
– NTCF prices fell 5.8% QoQ / 7.3% YoY to Rs185. Caprolactam prices fell 18.5% QoQ and 28.8% YoY to Rs80. The NTCF-caprolactam spread increased to Rs105 against Rs98 at T1FY21. This is one of the main reasons for the improvement in SRF’s technical textiles EBIT margin in Q2FY21.
– BOPET prices fell 4.7% QoQ and 2.0% YoY to Rs119. PTA and MEG prices fell 13.6% QoQ / 38.8% YoY to Rs33 and 4.0% QoQ / 21.2% YoY to Rs29, respectively, probably due to weak oil prices raw. The BOPET-PTA / MEG spread fell 1.2% qoq as it was up 29.0% yoy to Rs81 (vs. Rs82 in Q1FY21). However, the BOPET-PTA / MEG spread fell to Rs79 (down 3.3% MoM) during the month of September’20.
– BOPP prices increased 0.2% QoQ and remained stable year-on-year at Rs125 while polypropylene prices rose 12.1% QoQ / fell 13.7% year-on-year to Rs65. The BOPP-PP price differential was at Rs60, up 20.7% year-on-year, but it was down 10% quarter-on-quarter. In September 20, the BOPP-PP spread plunged to Rs58 (down 7.7% MoM).
NFIL: we see a downside risk for the achievement of R-22 for fiscal 21
– R-22 prices fell 7.8% QoQ and 2.5% YoY to Rs185. The price of fluorspar (acid spar) fell 3.3% QoQ and 8.2% YoY to Rs30. The spread of R-22 (fluorspar and chloroform) was Rs117 versus Rs123 at T1FY21. The drop in chloroform prices from 23.8% QoQ to Rs19 is benefiting the spread. We see a risk in our R-22 realization assumption for FY21 as it started to ease in September 20.
Sudarshan Chemical (SCIL): Organic Pigment Prices Fall 2.9% QoQ
– Organic pigment prices were down 2.9% qoq and up 1.9% yoy to Rs489 from Rs503 in Q1FY21. Organic pigments include all colors, including CPC. Their export volumes fell 0.7% year-on-year to 27.7 kt in T2FY21
– Prices for Azo Pigment Blends fell 8.9% QoQ and 16.3% YoY to Rs417 from Rs458 at Q1FY21.
– Inorganic pigment prices rose 4.6% QoQ and down 6.7% YoY to Rs93 versus Rs89 in Q1FY21.
Galaxy Surfactants (GSL): Lauryl Alcohol Prices Up Slightly
– Lauryl alcohol prices were Rs92, down 5.5% qoq but up 11.1% yoy, versus Rs97 in Q1FY21. This means that the increase in gross margin for Galaxy Surfactants at T2FY21 cannot be attributed to the price movement of lauryl alcohol.
– Ibuprofen prices fell 23.8% QoQ and rose 39.3% YoY to Rs 2,605 (vs. Rs 3,420 at T1FY21).
– IBB prices increased 2.0% QoQ and 0.4% YoY to Rs135 against Rs132 in Q1FY21.
– 2,4-D prices increased 4.7% QoQ, but were down 13.7% YoY to Rs155 (vs Rs148 at Q1FY21). Export volumes fell 3.8% year-on-year to 4,511 t in Q2FY21.
– Para-cresol prices were down 9.8% qoq and 12.8% yoy to Rs171. Export volumes fell 33.0% year-on-year to 2,243rd in Q2FY21.
– Epoxy prices fell 7.6% QoQ and 11.4% YoY to Rs156. Export volumes fell 4.3% year-on-year to 5,461 te in Q2FY21.
– Resorcinol prices rose 2.8% QoQ, but fell 1.6% year-on-year to Rs682. Export volumes increased 47% year-on-year to 765 te.
– PTFE prices fell 1.3% QoQ, but increased 2.6% yoy to Rs683 (vs Rs692 in Q1FY21). The spread of PTFE (fluorspar) decreased 1.0% QoQ, but increased 4.1% year-on-year to Rs605 (vs. Rs611 at T1FY21). Export volumes declined 13.4% year-on-year to 2,414 t in Q2FY21.