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Price trend in February’21

R-22 realisation rose to Rs181 in Feb’21 from Rs157 in Q3FY21 and lows of Rs148 in Nov'20. MDC prices rose 17% QoQ to Rs39 in Q4FY21 and this explains part of the margin expansion for SRF’s chemical business. BOPET-PTA/MEG prices have been stable – down 0.5% QoQ (up 3.5% YoY) to Rs69 in Q4FY21. BOPP-PP spreads have dipped to Rs67 (vs Rs70 in Q3FY21).

We see margins shrinking for SRF’s packaging films business, and the entire effect should be seen in Q1FY22 as it shed inventory gains. Lauryl alcohol prices rose sharply to Rs111 (up 20.2% QoQ) in Q4FY21, which means Galaxy Surfactants’ revenue growth will be optically higher and margins lower. Pigment export volumes have been growing quite impressively, up 16.1% YoY in Q4FY21, and realisations are 4.7% QoQ higher, which should benefit Sudarshan Chemical.

SRF Ltd: Good recovery seen in R-22 realisation; BOPET spread stable

* R-22 prices rose 11.2% QoQ (fell 9.3% YoY) to Rs174 in Q4FY21. Fluorspar (acid spar) prices were 9.2% QoQ / 5.9% YoY higher at Rs32, while on MoM basis fluorspar prices rose 38% to Rs38. R-22 spread (to fluorspar and chloroform) was at Rs112 vs Rs97 in Q3FY21.

* MDC (methylene chloride) prices rose 17.1% QoQ / 12.7% YoY to Rs39, and methanol and chlorine prices also increased. Our analysis suggests spreads / margins in MDC for SRF should have slightly dipped. MDC prices rose 17% MoM to Rs40 in Feb’21.

* NTCF prices declined 8.1% QoQ / 16.8% YoY to Rs159 in Q4FY21. Caprolactam was up 26.0% QoQ and 10.7% YoY at Rs107. NTCF-caprolactam spread fell to Rs52 vs Rs60 in Q3FY21. However, SRF has reported better margins (likely on inventory gains on rise in caprolactam prices).

* BOPET prices were up 6.5% QoQ / down 0.8 % YoY at Rs118. PTA prices rose 16.9% QoQ / fell 9.8% YoY to Rs41 while MEG prices were up 22.0% QoQ / 3.5% YoY at Rs41. BOPET-PTA/MEG spread contracted 0.5% QoQ, but expanded 3.5% YoY to Rs69 (vs Rs70 in Q3FY21). However, on MoM basis, spreads were up 1.5% in Feb’21.

* BOPP prices rose 6.1% QoQ / 12.8% YoY to Rs147 while polypropylene (PP) prices were up 17.3% QoQ / 19.4% YoY at Rs80. BOPP-PP price spread was at Rs67, down 4.8% QoQ but up 5.8% YoY. However, on MoM basis, the spread shrunk to Rs62 in Feb’21 from Rs70 in Jan’21 (down 11.1%).

NFIL: R-22 realisation improved more than feedstocks, thus spreads rose

* R-22 prices rose 11.2% QoQ, but fell 9.3% YoY to Rs174. Fluorspar (acid spar) prices were up 9.2% QoQ and 5.9% YoY to Rs32. R-22 spread (to fluorspar and chloroform) was Rs112 vs Rs97 in Q3FY21. NFIL should have benefited from lower chloroform prices, which were down 1.0% QoQ and 33.4% YoY.

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