European Nitro Chlorobenzene Prices Surge in September 2023 Despite Weak Demand

As Natural gas reserves reached the 90% limit one month before the planned procurement strategy, there is mixed sentiment amongst the policymakers and manufacturers of Europe. Europe is a natural gas-based economy, contrasting Americas and Asia, which are generally crudely dominant. As global crude prices began to soar since July, a bullish trend in the prices of Nitro Chlorobenzene began in early September despite demand decline.

Nitro Chlorobenzene is an intermediate chemical whose end use includes textiles/apparel, construction, plastics, and automotive and agrochemicals, largely insecticides. Asia largely dominates Nitro Chlorobenzene, while significant downstream products occupy their markets in Europe and North America. The price of p-Nitro Chlorobenzene continues to show a bullish trend despite weak demand in Europe and Asia. Prices of p-Nitro Chlorobenzene recorded a FOB Qingdao price at USD 995/MT in the previous week, up by 8% MoM basis.

Germany continues to dominate the supply chain in Europe. Prices in Germany continued to remain bearish in 2023 till July. Multiple vendor inquiries revealed that the price of Nitro Chlorobenzene declined by 20% YoY in H1 2023 in Germany. This was primarily due to deflating energy prices, which skyrocketed in May 2022 due to supply chain disruptions. Exports from Germany to major trade partners like China declined by 12% YoY basis in H1 2023 and continue to do so due to the global demand crunch experienced by the major economies. Germany's supply in Europe continues to remain weak and still remains 20% below the five-year average. Construction activity remained down in Germany, with HCOB construction recording the largest plunge in August 2023. The demand for Nitro Chlorobenzene from end-use automobiles is largely driving the entire value chain of Nitro Chlorobenzene in Europe at the present moment, as multiple vendors alluded to this fact.

Germany continues to enjoy high natural gas inventories, which is not able to provide significant negative deflationary tendencies to the pricing of Nitro Chlorobenzene. Market experts continue to argue for an inflationary trend in the coming months, which is expected to suppress consumer demand. Europe's inflation decline remained modest in the month of August 2023 despite the strongest measures by the European Central Bank through monetary policy. A bearish sentiment prevails in the German market after observing the US inflationary data, which showed a rise in inflation in August along with a decline in housing and industrial activities.

American and Asian Nitro Chlorobenzene markets remained largely bearish due to aggressive destocking operations observed in China to hedge the rising inflationary trend in the coming months. Multiple inquiries revealed that demand for Nitro Chlorobenzene continues to remain weak in the markets due to consumers postponing purchases, which has led to a large inventory buildup. US imports of nitro benzene continue to decline from China due to weakening demand. China's oversupply of o-Nitro Chlorobenzene is pulling down the product's prices across the global market. At the same time, p- Nitro Chlorobenzene prices continue to observe a bullish trend and are expected to show a bearish trend in the coming weeks due to continued procurement by multiple downstream industries amidst destocking.

ChemAnalysts forecast that globally, the prices of Nitro Chlorobenzene are expected to be bearish due to weakening demand. A price recovery is expected with a delay once the crude prices begin deflating. Europe's recovery is expected to be earlier than Asian and American economies due to their different natures. Natural gas prices will remain stable in Europe, provided the winter remains normal.