Asian Ortho Nitro Toluene prices continue to remain steady in August, signs of weakness persist

Ortho Nitro Toluene (ONT) continued their stable trend into August despite growth in agrochemical procurement. Lower TDI demand weighed on upstream ONT prices throughout the month as automotive production in China fell by 4.8%, a major driver for ONT derived TDI and flexible PU foam. Construction based demand for PU foam continued to remain subdued. Another major disappointment has been the lower exports demand from APAC to US as well as Europe bound dyes and textiles. Lower` demand from the Western nations further added negative price pressures for ONT.

Despite the stabilization of raw material costs, the nitro chemical industry has experienced a notable increase in both revenue and sales, particularly in the niche of Nitro toluene. This growth has been primarily driven by a strong surge in demand from agrochemical producers, notably PI Industries, who have significantly contributed to this upward trend. The resurgence in demand was catalyzed by the conclusion of the El Niño period, which has been followed by favorable weather forecasts for the forthcoming monsoon season, leading to increased agricultural activities and, consequently, a heightened need for agrochemicals. ONT demand from dyes and textile suppliers have remained subdued for APAC as well as India as export markets, especially US bound deliveries have remained weaker, January-June 2024 data of US census bureau revealed.

As a result of these favorable conditions, market sentiment has shifted towards a more optimistic or bullish outlook. This has empowered suppliers to implement price hikes for their products, capitalizing on the heightened demand. However, this positive trend was countered by the situation in China, where expanded ONT production capacity have exerted downward pressure on ONT prices. The overcapacity in China has had a ripple effect on global competitors, including major players like Aarti Industries, which have seen their profit margins squeezed as a result.

India, on the other hand, has managed to capitalize on a pricing advantage over China, enabling it to capture a larger share of the domestic market. Nevertheless, this competitive edge has been gradually eroded due to the rising prices of ONT within India, driven by the robust domestic demand. As China recovers from its economic downturn, it has started to inundate the Asia-Pacific (APAC) market with an oversupply of ONT, further intensifying the downward pressure on prices.

In response to these market dynamics, both India and China are undertaking significant capacity expansions aimed at establishing themselves as global leaders in the production of ONT and other nitro aromatics. While these developments are indicative of growth potential, the industry continues to face considerable challenges. These include persistently high feedstock costs, logistical complexities, and other operational hurdles that have an adverse impact on profitability. Despite these challenges, the overall industry outlook for the next two quarters remains cautiously optimistic, with expectations of sustained growth and continued demand.