Tata Chemical, SRF, and Aarti Ind lead gains as chemical stocks soar as prices rise due to the Israel-Hamas conflict

 Tata Chemical, SRF, and Aarti Ind lead gains as chemical stocks soar as prices rise due to the Israel-Hamas conflict

On Wednesday's trading sessions, chemical stocks were in the spotlight due to an increase in price. According to analysts, bromine prices will rise due to increased geopolitical tensions brought on by the Israel-Hamas conflict and the fact that Israel is the world's biggest supplier of elemental bromide. On Wednesday's trading, shares of Tata Chemicals Ltd., Aarti Industries Ltd., Atul Ltd., SRF Ltd., GHCL Ltd., and Vinyl Chemicals Ltd. rose 1% to 4%.

In its report, the brokerage JM Financial noted that the ongoing unrest in Israel raises some doubts about the production, export, and sales of bromine from the Dead Sea, one of the biggest salt flats on earth and home to about 50–55% of the world's bromine capacity. Bromine prices have surged by 40% since June 23 due to decreased operating costs for seawater bromine plants.

Israel provides over 30% of the world's bromine, thus any negative effects on exports might push up prices from the current USD 3.5/kg.

Given that Archean produces bromine from Rann of Kutch and is planning to launch a few bromine compounds in 2HFY23, we think any rise in bromine pricing is good news for the company. According to our sensitivity, a change in the price of bromine of USD 0.4/kg causes an increase in our target price of 8%, the brokerage noted in its research.

According to the brokerage report, benzene prices increased by almost 20% on October 23. Benzene is a crucial raw material for businesses like Deepak Nitrite, Aarti Industries, Atul, etc. The price of toluene has increased by almost 6% throughout the same period.

Toluene is yet another crucial raw material used by organizations like Atul, Deepak Nitrite, Aarti Industries, etc. In addition, during the last three months, phenol-acetone spreads over benzene-propylene increased by 38% as a result of a significant rise in phenol and acetone prices (about 30%), as opposed to a little rise in propylene prices of just 15%.

"We continue to expect that Deepak's phenolics business could show favorable surprises from 2QFY24 onwards as phenol spreads appear to have troughed, in our view," the brokerage said.