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Prices in Q1FY22 were severely disrupted due to commodity price volatility and logistic issue; thus, spreads will be distorted and not representative. R-22 prices have started moving up with normalisation of demand and SRF management did indicate better pricing situation for ref-gases. NTCF-caprolactam spreads are unusually low and should improve in subsequent months as highlighted by SRF. BOPET and BOPP should see spreads coming down gradually, slightly visible in Q1FY22.

Lauryl alcohol price has risen significantly, as anticipated, while LAB price increase is relatively lower. Rossari Biotech’s key raw materials have seen sharp rise in prices, which was also visible from dip in gross margins for company in Q1FY22. Pigment prices have seen increase, which is good for Sudarshan Chemical, but it is to be seen how much raw material inflation gets passed on to customers.

SRF Ltd: Quarterly trend distorted due to commodity volatility

* R-22 prices rose 9.9% QoQ (fell 2.4% YoY) to Rs195 in Q1FY22. Fluorspar (acid spar) prices were 8.8% QoQ / 17% YoY lower at Rs26. R-22 spread (to fluorspar and chloroform) was at Rs109 vs Rs114 in Q4FY21.

* MDC (methylene chloride) prices rose 18% QoQ / 32% YoY to Rs46, while methanol has increased sharply but chlorine prices have declined. Our analysis suggests spreads / margins in MDC for SRF should have improved significantly. MDC prices rose 2.7% MoM to Rs47 in May’21.

* NTCF prices declined 20.8% QoQ / 29.2% YoY to Rs139 in Q1FY22. Caprolactam was up 20.2% QoQ and 39.2% YoY at Rs137. NTCF-caprolactam spread fell to Rs2 vs Rs62 in Q1FY22. This is significantly different compared to massive margin expansion seen for SRF in technical textiles business in Q1FY22, and management commentary on structural margin expansion. We believe the difference could be more timing difference and spreads should improve in coming months, in-line with company’s comments even for trade data.

* BOPET prices were up 13.1% QoQ / 8.2% YoY at Rs135. PTA prices rose 28.4% QoQ / 42.1% YoY to Rs54 and MEG prices were up 15.2% QoQ / 68% YoY at Rs51. BOPET-PTA/MEG rose 4.5% QoQ / down 12.9% YoY to Rs71 (vs Rs68 in Q4FY21). However, on MoM basis, spreads were down 10.5% in May’21.

* BOPP prices rose 20.4% QoQ / 44.3% YoY to Rs180 while polypropylene (PP) prices were up 19.5% QoQ / 85% YoY at Rs107. BOPP-PP price spread was Rs73, up 21.6% QoQ and 9.2% YoY. On MoM basis, the spread was Rs88 in May’21 from Rs51 in Apr’21.

NFIL: Fluorspar prices trend positive for company

* R-22 prices rose 9.9% QoQ, but fell 2.4% YoY to Rs195. Fluorspar (acid spar) prices were down 8.8% QoQ and 17% YoY to Rs26. R-22 spread (to fluorspar and chloroform) was Rs109 vs Rs114 in Q4FY21. NFIL should have lower benefit from higher chloroform prices, which were up 2x QoQ to Rs35.

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