Which chemical stocks to bet on this festive season?

In September, the Chemical industry experienced a notable increase in prices, primarily driven by a surge in crude oil prices and a revival in demand. Certain basic chemicals, such as soda ash, refrigerant gas, and phenol, witnessed price hikes during this period, while others like Ethyl Acetate-Acetic Acid, PVC, and TDI saw price declines. This uptick in chemical prices is a positive sign for the sector, signalling potential recovery in the coming months.

Globally, the chemical industry has been grappling with challenges, including weak global demand and inventory destocking. The ongoing economic slowdown in Europe and inflationary trends in the United States and Europe have contributed to subdued chemical demand. Despite this, China has continued to aggressively supply chemicals, leading to a subdued pricing environment. The global demand distress, particularly in developed markets like Europe and the US, has impacted the exports of Indian chemical manufacturers. However, domestic demand has provided some support to mitigate declining volumes.

The ongoing festive season has played a role in strengthening demand trends in the chemical industry, though caution remains regarding the near and medium-term outlook. Nonetheless, several factors are expected to support the sector’s positive long-term outlook. These include stable crude oil prices, demand recovery from end-user industries, and a potential increase in volumes.

Key beneficiaries of this chemical price uptick include companies such as Archean Ltd., Tata Chemicals, Deepak Nitrite, GHCL Ltd., Aarti Industries, and Nocil Ltd. Additionally, specialty chemical companies with a focus on value-added products, like SRF and Navin Fluorine, are expected to perform well in the long run compared to those primarily dealing in basic chemicals. However, competition from China remains a concern in the commodity chemicals segment.