Nitrobenzene Prices Surge at the Start of Q4 2023, Causing Concern for Global Economic Recovery

Nitrobenzene prices continued to rally upward across the globe in the first week of October 2023 after a skyrocketing month observed in September. Rising prices of Nitrobenzene timed with increasing crude prices with emerging geopolitical situations are perpetuating the headwinds regarding the economic recovery of major economies across the globe. Major producers of Nitrobenzene expect a better realization in the cash flow in the short duration but caution against a long, painful recovery.

Nitrobenzene prices skyrocketed from USD 1055/MT to USD 1260/MT assessed at FOB Shanghai in September. A monthly rise of 25% in prices, with the continual rise of crude prices in the given month, provides for future price hikes in the petrochemical section in the coming months, as experts argue.

Nitrobenzene is an intermediate chemical used largely in producing Aniline, and the major end-use industries include Polyurethanes, primarily used in the construction feedstocks and automotive industries.

In the global markets, the prices rallied up and continue to follow the same trend due to aggressive Chinese procurement from the global supply. Mainland China continues to be the largest supplier of Nitrobenzene in the world. The Chinese forecast a strong recovery session in H2 of 2023 and Q1 of 2024 due to the Chinese government’s stimulus to revive the construction sector by reducing Key interest rates and fiscal incentives. Market sentiments turned bullish in September, with the short-term surge in demand from the Chinese National Festival observed in the last week of September focused on significant procurement for domestic consumption. Aggressive Chinese procurement strategies forced many importers, like India, Japan, etc., in the region to diversify their supply lines of Nitrobenzene as Urea prices shot up in India due to the Chinese price surge.

In European and American markets, Nitrobenzene prices showed a bullish trend on the backs of large Chinese imports. Europe imports a substantial amount of Nitrobenzene from China for domestic consumption. Rising prices in China and reduced supply forced Europe to postpone procurement as inflation surmounts in major nations. Previously, in August, green shoots in inflationary trend were observed, and a rise in procurement of Nitrobenzene was observed for the inventory replenishment. As September progressed and inflationary pressure surmounted, destocking and demand drop across European and American markets started. Economic experts revealed that American and European markets face a high inflationary trend with weak economic growth primarily due to imported inflation. Previously, White House officials announced policy support for diversifying supply lines to hedge against imported inflation. As the US imports substantial amounts of Nitrobenzene from China, destocking of the downstream products, especially Polyurethanes, was observed in the USA once inflation results were announced. Forecasts assert that the US will face rising inflation in the coming months, with IMF reducing the USA’s growth forecast by 0.2 percentage points while the Global economy by 0.1 percentage points.

ChemAnalyst research focused on Nitrobenzene and its major downstream MDI forecasts a bullish trend in the Asia Pacific region in the coming months as substantial price hikes in crude continue to be transferred in the value chain. China’s Nitrobenzene market is expected to saturate due to weak global demand and economic prospects, with major headwinds still persisting. European markets are expected to diversify their supply chain towards North American markets rather than the Middle East and Asia Pacific due to rising geopolitical situations as the Israel-Hamas conflict intensifies in the short term. Though freight charges continue to decline between Asia and the Mediterranean due to weak global trade, rising tensions, and conflicts are expected to improve freight charges, impacting Nitrobenzene prices between Asia and Europe amidst a sudden rise in demand for shipping.