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Price trend in July’21

R-22 prices have been flattish at Rs194 in Q2FY22-TD and spreads are likely be stable for SRF though margins for Navin Fluorine may dip on higher chloroform prices. In the packaging films segment, spreads are stable in BOPET but high in BOPP, which should continue to benefit SRF. NTCF has seen >2.5x jump in its import volumes in past three months (probably a reflection of favourable import prices vs domestic). SRF has guided for higher spreads in technical textiles.

Lauryl alcohol prices have risen significantly and LAB price increase, though relatively lower YoY, is fast catching up. Rossari Biotech’s key raw materials have seen sharp rise in prices, which should keep pressure on the company’s gross margins in Q2FY22. Pigment prices have increased (good for Sudarshan Chemical), but it is to be seen how much raw material inflation of it gets passed on . EPL should benefit from moderation in polymer prices.

SRF Ltd: BOPET and ref-gas prices and spreads are stable; NTCF volatile

* R-22 prices dipped 0.4% QoQ (up 5.3% YoY) to Rs194 in Q2FY22-TD. Fluorspar (acid spar) prices were 0.7% QoQ / 14.6% YoY lower at Rs26. R-22 spread (to fluorspar and chloroform) was at Rs87 vs Rs107 in Q1FY21. SRF is backwardintegrated for chloroform, hence spreads should be stable.

* MDC (methylene chloride) prices rose 14.3% QoQ / 60% YoY to Rs53 while methanol and chlorine prices too have increased sharply. Our analysis suggests spreads / margins in MDC for SRF should have improved on YoY basis, but should be stable sequentially.

* NTCF prices rose 1.6% QoQ but were up 26.5% YoY to Rs136 in Q2FY22-TD. Caprolactam was up 14% QoQ and 109% YoY at Rs167. NTCF-caprolactam spread fell to a negative Rs31 vs negative Rs13 in Q1FY22-TD. This is significantly different from the margin expansion hinted by SRF in the technical textiles business, and structurally higher spreads. Notably, NTCF import volumes have grown substantially to >5kte/month in past three months from 2kte/month in the preceding ten.

* BOPET prices expanded 1.1% QoQ / 13.4% YoY to Rs135. PTA rose 1.4% QoQ / 67% YoY to Rs55, and MEG prices were down 2.3% QoQ but up 64% YoY at Rs48. BOPET-PTA/MEG rose 1.8% QoQ / shrunk 11.4% YoY to Rs72 (vs Rs70 in Q1FY22). However, on MoM basis, spreads were up 4.1% in Jul’21.

* BOPP prices fell 1.6% QoQ / rose 40.3% YoY to Rs176 while polypropylene (PP) prices were down 8.7% QoQ / up 43% YoY at Rs92. BOPP-PP price spread was 7.7% QoQ and 38% YoY higher at Rs83. MoM spread was Rs83 in Jul’21, up 1.2%.

Navin Fluorine (NFIL): Higher chloroform prices will impact R-22 margins

 R-22 prices dipped 0.4% QoQ, but rose 5.3% YoY to Rs194. Fluorspar (acid spar) prices were down 0.7% QoQ and 14.6% YoY to Rs26. R-22 spread (to fluorspar and chloroform) was Rs87 vs Rs107 in Q1FY22. NFIL should be negatively impacted from higher chloroform prices, which were up 35% QoQ to Rs49.

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