Shanghai (China): Nitrobenzene prices remained subdued globally in the fourth quarter of FY23, partially due to the subdued polyurethane markets and negative feedstock pressures. By the end of December, Nitrobenzene markets remained largely stable amidst improving market demand for dyes and pharmaceuticals, arresting the steady fall in prices as polyurethane producers destocked inventories in Q4 FY24. Prices of Nitrobenzene, largely traded in China, were assessed at USD 1700/mt by the end of December.

In European and American markets, Nitrobenzene markets are largely driven by polyurethane volumes. Analysts argue that marginal rebounds in China during the third quarter remained the only bright spot for polyurethanes and nitrobenzene markets globally. European and American demand remained subdued, largely owing to a tight credit environment, and the slowing down of automotive markets, largely driven by the lowering of EV sales, continues to remain a major risk for the producers of Nitrobenzene globally. Huntsman, the major producer of Nitrobenzene and downstream polyurethanes, is expecting lower EBITDA for FY23 and further slowing of Nitrobenzene and Polyurethanes till H1 FY24.

Downstream Methylene Diphenyl Diisocyanate demand remained weak due to poor construction activity, with the US showing marginal improvements with rising employment numbers in construction. Europe is anticipated to observe lower demand for MDI and polyurethanes subsequently in FY24, largely due to cuts in funding provided by the various states of the Eurozone during COVID to support the construction sector. Italy has reduced the 'superbonus' on energy transition refurbishment, a major driver of polyurethane and nitrobenzene demand, in FY24, and Germany reduced subsidies provided on the transition economy, largely due to consolidating deficits. An analyst remarked that FY23 remained neutral for nitrobenzene and polyurethane markets in Europe largely due to government support while inflation soared, and private consumption remained low.

While the removal of subsidies, according to the several sources, may not translate into the return of private demand for polyurethanes and energy transitions, as observed in the slowing of automotive demand despite government concessions. Interest rates continue to remain high in the Eurozone and the USA, coupled with rising inflation in the Eurozone largely owing to high energy and food inflation; demand for nitrobenzene is anticipated to fall in Q1 FY24.

In Asian markets, Nitrobenzene volumes are largely driven by polyurethanes, pharmaceuticals, and the dye market. Previously, the high procurement of nitrobenzene by China for agrochemical supply turned the market bullish, and the onus for further bullishness was taken over by polyurethane procurement amidst rising Chinese demand in Q2 FY23 results. Asian markets currently remained stable largely owing to stable demand from pharmaceuticals, rubber chemicals, and the dye market, largely owing to a seasonal slump in construction, festivities, and stimulus provided by the Chinese government. Indian nitrobenzene demand remained lower, largely owing to weak rural demand and weak textile markets as manufacturing in India slowed down in Q4 FY23. Japanese and Korean demand for Nitrobenzene, largely driven by the automotive industries, remained positive, holding the regional prices stable, offsetting the Indian slump. Overall, Chinese output of Nitrobenzene outpaced the demand requirements, with prices ending lower by the end of FY23.

ChemAnalyst forecasts stable yet lower prices for Nitrobenzene in H1 FY24 globally until rate cuts in Europe and America provide the required liquidity for producers and consumers to shell out cash for automotives and construction amidst stable crude oil and gas prices.