Geopolitical Tensions Propel Chemical Stocks Amidst Rising Prices

Geopolitical Tensions Propel Chemical Stocks Amidst Rising Prices
Geopolitical Tensions Propel Chemical Stocks Amidst Rising Prices
Geopolitical Tensions Propel Chemical Stocks Amidst Rising Prices
Geopolitical Tensions Propel Chemical Stocks Amidst Rising Prices

Geopolitical Tensions Propel Chemical Stocks Amidst Rising Prices

Geopolitical Tensions Propel Chemical Stocks Amidst Rising Prices

Surge in Bromine Prices– Geopolitical Tensions Propel Chemical Stocks Amidst Rising Prices

The chemical sector took the spotlight in Wednesday’s trading sessions, fueled by the surge in chemical prices. Analysts are attributing this rally to the increasing geopolitical tensions brought on by the Israel-Hamas war. Israel’s significant role as the world’s largest producer of elemental bromide is a key factor behind the rise in bromine prices. Companies like Tata Chemicals Ltd, Aarti Industries Ltd, Atul Ltd, SRF Ltd, GHCL Ltd, and Vinyl Chemicals Ltd saw gains ranging from 1% to 4% during Wednesday’s trade.

Israel’s Role in Global Bromine Supply

As per brokerage JM Financial’s report, the ongoing situation in Israel has created uncertainty around the production, export, and sales of bromine from the Dead Sea. The Dead Sea is one of the world’s largest salt pans and accounts for approximately 50-55% of the world’s bromine capacity. Due to the lower operating expenses for seawater bromine manufacturers, bromine prices have surged by 40% since June 23.

Potential Impact on Bromine Prices and Market Players

Given that Israel supplies around 30% of the world’s bromine, any negative impact on exports could lead to an increase in prices from the current USD 3.5 per kilogram. JM Financial’s report indicates that Archean, which produces bromine from Rann of Kutch and is planning to introduce certain bromine derivatives in 2HFY23, stands to benefit from rising bromine prices. Their sensitivity analysis suggests that a USD 0.4 per kilogram movement in bromine price results in an 8% increase in the target price.

Impact on Raw Ingredients and Market Expectations

Furthermore, the report highlights the surge in benzene prices by approximately 20% on October 23. Benzene is an essential raw ingredient for companies like Deepak Nitrite, Aarti Industries, and Atul. During the same period, toluene costs have risen by about 6%. Toluene is another crucial raw ingredient for companies such as Atul, Deepak Nitrite, and Aarti Industries.

The last three months have also witnessed a remarkable 38% growth in phenol-acetone spreads over benzene-propylene. This growth is attributed to the substantial increase in phenol and acetone prices, around 30%, compared to the modest 15% increase in propylene pricing.

As per the brokerage, Deepak’s phenolics business may experience positive surprises from 2QFY24 onwards, as phenol spreads are likely to have reached their trough. This report provides valuable insights for market participants in the chemical sector, but it’s essential to remember that these views and recommendations represent individual analysts and don’t necessarily reflect Mint’s perspective.

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