The global dye and dye-intermediates industry is witnessing a significant shift in supply dynamics, with tightening supply from China driving up prices of several key intermediates. H-Acid, an important raw material used in the production of reactive dyes, has been among the major products witnessing a sharp price increase.
The rise in H-Acid prices could benefit Indian companies with exposure to the product by improving realisations. It could also create an opportunity for Indian manufacturers to gain market share as global buyers increasingly look to diversify their sourcing beyond China.
Massive Surge in H-Acid Prices
H-Acid, an important intermediary material for making reactive dyes, has seen a tremendous price surge. As per industrial reports, there has been an increase in prices from approximately Rs. 500/kg to Rs. 2,850/kg, which is a 470% increase.
China has seen mainstream prices go up from 40,000 yuan/ton at the start of the year to over 150,000 yuan/ton by early September, while major suppliers quoted even above 200,000 yuan/ton. Price increases have been seen in other important dye intermediaries such as Para Ester, K Acid, and J Acid.
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Drivers Behind the Price Increase
This price jump is largely because of the supply shortage in China due to severe restrictions on environmental and safety regulations. Compliance capacity is quite limited, with many plants seeing closures or operating limitations. This is regarded as more of a structural change as there are no compliance capacities coming into the Chinese market in the near future.
Impact on Indian Chemical Stocks
With the sudden spike in prices witnessed in China, some key Indian chemical stocks like Kiri Industries Ltd., Bodal Chemicals Ltd., and Bhageria Industries Ltd. have become the talk of the town.
Being major players in the dye and dye intermediate markets, Indian chemical firms will enjoy high realisations along with an opportunity to steal market share from Chinese chemical manufacturers as buyers look for alternative sources of production.
Stocks in Focus
Kiri Industries Ltd
Kiri Industries is one of the largest Indian producers and exporters of dyes, dye intermediates, and basic chemicals. It has products such as H-Acid and Vinyl Sulphone, and Kiri Industries has also achieved backward integration in some of the chemicals used in the dyeing process.
With a market capitalisation of Rs. 3,545 cr, the shares of Kiri Industries Ltd were trading at Rs. 544.05 per share, up from its previous close of Rs. 542.05 per share.
Bodal Chemicals Ltd
Bodal Chemicals Ltd is an integrated producer of dye intermediates, dyestuffs and basic chemicals, with H-Acid as one of its major products. Bodal Chemicals has an H-Acid production capacity of about 7,200 tonnes annually and is also engaged in the production of K-Acid, Gamma Acid, FC Acid and many more dye intermediates.
With a market capitalisation of Rs. 2,455 cr, the shares of Bodal Chemicals Ltd were trading at Rs. 195 per share, down from its previous close of Rs. 201.50 per share.
Shree Pushkar Chemicals & Fertilisers Ltd
Shree Pushkar Chemicals & Fertilisers Ltd has a diversified chemical portfolio of dye intermediates, dyestuffs, fertilizers and acid chemicals. Among the dye intermediates produced by Shree Pushkar Chemicals & Fertilisers Ltd, there are H-Acid, K-Acid, Vinyl Sulphone, Meta Ureido Aniline and R-Salt.
With a market capitalisation of Rs. 1,575 cr, the shares of Shree Pushkar Chemicals & Fertilisers Ltd were trading at Rs. 487.25 per share, down from its previous close of Rs. 497.90 per share.
AksharChem (India) Ltd
AksharChem produces Vinyl Sulphone and H-Acid, and has backward integration in H-Acid. The company is also involved in CPC Green and precipitated silica. This is a form of diversification away from dye intermediates. The H-Acid and Vinyl Sulphone that AksharChem produces make it susceptible to fluctuations in the international prices of dye intermediates.
With a market capitalisation of Rs. 303 cr, the shares of AksharChem (India) Ltd were trading at Rs. 378 per share, down from its previous close of Rs. 393.30 per share.
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Bhageria Industries Ltd
Bhageria Industries is exposed to the dye intermediate market through intermediates such as H-Acid, Gamma Acid and Vinyl Sulphone. These are used as precursors in the manufacture of dyes. Along with chemicals, Bhageria is also foraying into APIs, making it a diversified player.
With a market capitalisation of Rs. 1,663 cr, the shares of Bhageria Industries Ltd were trading at Rs. 381.25 per share, down from its previous close of Rs. 382.05 per share.