Crop & Chemical dashboard: July 2023

7 Aug 2023 , 10:45 AM

Post successive months of correction, Jul’23 witnessed an uptick in the prices of several Commodities. Prices of PVC, phenol, benzene, bromine and ammonia rallied over the last month. However, management commentary remains cautious as channel destocking continues. MNCs have lowered their 2023 outlook; but Dow has stated that the upcycle will likely begin in 2024. Agriculture season in India also kick-started after a sluggish start. Rainfall has turned from a deficit to 4% excess over the last month and reservoir levels are healthy. Decline in pulses acreages has been offset by increases across rice, coarse cereals and oilseeds. 

Global Agriculture update: In Jul’23, US prices of corn and rice fell 9-14% as the USDA has raised its world production outlook for these products. Uncertain demand amidst tough times. Conversely, Indian market has seen an uptick in the prices of wheat and maize – which have rallied by 3-6% MoM. Ban on the non-basmati exports of rice is likely to hold off rising prices of rice. 

Sowing update: While the overall acreage sown is flat YoY, acreages for pulses are lower by ~11%. This is offset by higher acreages of rice, coarse cereals and oilseeds. However, crop production is expected to have taken a severe hit due to the excessive rains seen across various parts of India. 

Rainfall update: While rainfall was subdued in the initial weeks of the season, it has caught up over the last month. Till 1st Aug, the monsoon rainfall was 4% above normal and reservoir levels are above the last 10yr average. Till date, rainfall has been normal or better in ~30 out of the 36 districts. 

Contrasting trend in bulk chemicals: From 2nd August, Tata Chemicals has again initiated a price cut of 5-6% in soda ash dense and light. Reliance Inds has hiked PVC prices by ~2% from 1st August. Soda ash prices are down 17-18% FYTD, while PVC prices are down 6.2% FYTD. While Tata Chemicals took price cut in Apr, May, June and now August, PVC prices seem to have reversed the falling trend and have seen price hikes in June, July and August. 

Prices recovering across most commodity chemicals: After successive months of decline, prices started recovering through Jun’23. Benzene prices rose ~18% MoM. Phenol and Acetone prices expanded 20-30% MoM. Bromine and VCM prices expanded ~9% MoM. Increase in Ammonia demand has driven prices up ~18% over the month. Phosphoric acid prices fell ~10% over the last month. However, the trend in spreads is mixed. While Phenol spreads have bounced back, those of PVC, Ethyl Acetate and TDI remain under pressure. 

Other highlights: 1) Government plans to set up chemical parks in either Gujarat or Andhra Pradesh to boost domestic manufacturing. 2) Government has approved Rs198bn PLI scheme for the Chemicals and Petrochemicals industry, to promote the manufacturing of green hydrogen in India. 3) US-based agrochemical producer FMC cut its Q2 earnings outlook by nearly 50% and lowered its guidance for 2023, because of unprecedented destocking. 4) Asia’s acetic acid market is seeing patchy demand, while on the supply side, new capacities are expected this year. 5) Bayer will take a €2.5bn write-down over the Glyphosate business. 6) Anupam Rasayan has signed an MoU with 3xper Innoventure Limited — a technological collaboration for newage Pharma molecules. 7) The Board of Tatva Chintan has approved to raise up to Rs2bn via the QIP route.