Indian Phenol Makers Seek Greater Profits as the Product Spreads Widen

Strong derivative demand and hovering optimism in the Indian markets as economic activity shows a quicker-than-expected revival post Q2 has lifted the Indian stocks to a record high.  Shares of Deepak Nitrite Ltd. (DNL), one of India's leading chemical intermediates company hit INR 923.25, to an all-time high on Wednesday.

The company’s shares have tripled from its 52-week low of INR 310 in mid-March. As per a company personnel, this sharp surge has been catalyzed by higher Phenol margins. Average Benzene-Phenol spreads have strengthened by 37.5% this year and by 11.65% quarter-on-quarter, for the quarter ending September. Deepak Nitrite has reported robust operational efficiencies in its efforts to maintain its strong Phenol market share which currently stands around 65 per cent in India. 

Extending anticipated gains, the Indian Phenol is being currently priced around USD 1140 per tonne on Ex-depot basis, higher by USD 100 per tonne than levels observed in Q1. With the positive correction in spreads observed from Q2FY21 onwards, the company is anticipating higher margins especially from the pharmaceutical grade Isopropyl Alcohol, which has been widely used as a solvent in the pharmaceuticals industry and an essential input for sanitizers in the pandemic-era. The company's wholly owned subsidiary Deepak Phenolics started commercial production of Isopropyl alcohol (IPA), a key downstream sector of co-product Acetone at its Dahej, Gujarat facility in April. The unit has a manufacturing capacity of 30 KTPA.

As per ChemAnalyst,” Eyeing on the recent shifts in trade preferences across the globe, Deepak Nitrite is heavily betting on opportunities such as US-China trade tensions, and environmental issues inducing closure of several Chinese capacities. The Indian Chemical Council is aiming to double the turnover of the Chemical industry to USD 300 billion by 2025.The company is now opportunistic of the government's support and recent policy changes to curtail country’s import dependence.”