Qingdao, China- Nitrobenzene prices have remained stable in China since the beginning of July 2024. The stability in the prices of Nitrobenzene has largely been attributed to weak demand sentiment in the domestic market as outlook for construction and automotive sectors have shown weak growth. As the outlook of the world’s largest producer as well as consumer remained bleak, Asia’s overall demand is anticipated to be on the lower end. However, positive sentiment from India and SE Asia to keep the markets optimistic in the coming months.

Nitrobenzene is the major feedstock to produce Aniline and subsequently MDI (Methylene Diphenyl Isocyanate). China is the largest producer of MDI globally is also one of the largest producers of Nitrobenzene. The Chinese suppliers have not been revising prices downwards despite the markets look overstocked for the given volumes. The downstream Aniline FOB Shanghai prices fell by 6% in the given timeframe, indicating that the markets favored higher conversion of Nitrobenzene to aniline throughout the period. Presently, the market continues to favor higher conversion of Nitrobenzene to MDI polymeric grade for polyurethane production. This production since the past two months, was largely due to the anticipation of strong domestic demand in Chinese market owing to continuous government stimulus provided.

Similarly, the major consumer of Nitrobenzene derivative, automotives have dropped by 2.1% in production in June. To counter this fall, Chinese producers have been focusing on increasing exports by keeping the prices lower and remaining competitive with other nations.

SE Asian markets have been showing good economic performance. Malaysia registered strong growth of over 5% in Q2 due to revival in production and services. As a strategy, Chinese Nitrobenzene suppliers have been focusing on increasing penetration of their downstream MDI supply into SE markets as well as Indian markets. The higher Chinese production of Nitrobenzene to the downstream Aniline and MDI has kept the price points in SE Asian markets already lower. Chinese Nitrobenzene prices FOB basis have however remained elevated at USD 1510/MT due to tightening of supply in the regional markets.

Market participants revealed that in-order to gain volumes downstream and improve their petrochemical margins, Chinese producers have been keeping their intermediate products like Nitrobenzene supply tight for global supply. Analysis of CFR Shanghai deliveries of Benzene and FOB Polymeric grades of MDI, the spread margins have remained largely stable. Nitrobenzene to MDI spread margins however remained relatively higher, assessed for SE Asia bound deliveries.

As per ChemAnalyst, the Nitrobenzene prices is expected to turn bullish further as Chinese traders and suppliers try to gain edge over ASEAN as well as Indian markets in the coming weeks with further higher conversions of Nitrobenzene to downstream MDI.