*Chemicals prices on an upswing post hurricane Harvey disruptions in the US – Positive for few Indian chemical companies*
Winter storm and ultra-low temperatures in the US have disrupted operations of the US Gulf Coast refineries and petrochemical plants. Forced shutdowns, lower operating rates, and force majeure, are expected to impact the availability of some of the basic building blocks as well as basic chemicals too. Prices of these petrochemicals and chemicals are expected to benefit in the near to medium term because of disruption in availability. The pricing impact would not be limited to the US but the tremors are expected to be felt across the globe. Some of the chemical segments which are reeling under price pressure are expected to benefit from the phenomenon.
We believe that the Indian counterparts will also be the beneficiaries of this event and their financials are expected to improve in the current quarter, probably benefitting the next quarter too. We would like to bifurcate company-wise impact according to the chemicals they manufacture
*_Chlor-Alkali_* – Olin’s force majeure and reduced operating rate of Covestro to benefit caustic/ chlorine prices which have started moving up. Domestically prices have surged from sub-₹ 20/ kg to over ₹ 23-24/ kg along with ~₹ 3-4/ kg positive realisation on chlorine. *Positive for Gujarat Alkalies & Chemicals, Grasim, DCM Shriram, Meghmani Organics, Andhra Sugars among others*
*_MDI, TDI_* – Reduced operating rate of Covestro to further benefit MDI/ TDI pricing. TDI prices have restarted their uptrend post correction towards the end-2020. *GNFC* is the only sizable TDI player and is expected to benefit
*_Vinyls_* – Olin’s force majeure to benefit vinyls pricing, PVC prices may continue their uptick and expected to remain firm in near term which shall benefit *DCM Shriram*
*_Acetic Acid_* – Acetic acid value chain prices have also firmed up in past month or so which shall benefit *GNFC*
*After a quarter backed by demand recovery (Q3), this quarter is also expected to be a good quarter for the Indian chemical companies keeping the valuations at bay*
Rohit Nagraj – Sunidhi Research