Tracking elevated crude oil prices, downstream chemical prices also remained firm, aided by continued concern about shipment availability, Emkay Global Financials has said in a report.
"The recent spike in Covid-19 cases in South China has stalled port movement as strict containment measures have been imposed in the region. Yantian port, one of the largest container handling ports in China, has been facing congestion since early-June, leading to a jump in container freight costs. Although price increases in June'21 for most of the chemical products under our scanner were only in single-digits, we believe sustaining logistic issues are going to push the prices northward in the coming month," the report has said.
Some of the chemicals that gained the most in June (MoM) are Butadiene (25%), Ammonia (22%), Benzene (10%) and Phenol (3%), while we saw some normalization in the prices of chemicals such as Acetonitrile, Aniline, VAM, IPA, MEG and Acetone which were down by 3-13% MoM.
"Demand across the chemical space is healthy and rising with the reopening of economies; however, manufactures are facing challenges in meeting the rising demand in time due to logistics issues. As we have highlighted earlier, the late March Suez Canal blockage has affected the supply chain and the impact is likely to continue until July-Aug'21, with the newly emerged congestion in South China further worsening it. Container freight costs are still 2-2.5x higher YoY.
The uncertainty on chemical prices finding stability remains distant. Due to unprecedented levels of uncertainty, cost across the value chain is expected to rise. As a preventive measure, chemical players are opting for short-term pricing contracts rather than going for long term ones," Emkay has said in its report.
According to the firm, the uncertainty on chemical prices finding stability remains distant, due to unprecedented levels of uncertainty, cost across the value chain which is expected to rise.