Nitrotoluene Prices Soar Across the Globe in October 2023 Despite Weak Demand

Nitrotoluene prices continue to soar despite weakening global demand, especially in the ‘growth’ engines, viz-a-viz India and China. IMF, in its latest projects, downgraded Chinese growth rates to around 5% in FY23. Nitro-derived Aromatics continue to face ‘twin’ problems across the globe, including Nitrotoluene. According to analysts, a ‘twin’ problem includes rising input costs coupled with weakening downstream demand.

Prices of Nitrotoluene, according to ChemAnalyst, in China FOB Qingdao hovered around USD 2180/MT in the third week of October 2023, rising by 18% since the previous month. As Chinese Nitrotoluene prices increased, global prices largely followed a similar trend as China continued to supply the globe. Multiple factors contribute to the rise in prices, the primary one being the rising prices of feedstock Toluene and Nitration Charge. Vendor inquiries revealed supply constraints of nitration charge feedstock persisted in China as major supplies of the components are focused on the fertilizers industry for domestic and export contracts. Further analysis of contract sulfuric and nitric acid prices shows a decline in the coming months, and the prices of Nitrotoluene are expected to stabilize in the future. Geopolitical tensions in the Middle East are pulling the contract prices down while pushing up the spot prices significantly, which is causing price fluctuations in the feedstock markets of basic petrochemicals like Toluene and Benzene. Toluene prices have observed a bullish trend since the Israel-Hamas conflict flared up globally.

Secondly, the rising energy prices across the globe are forcing is continuing to provide a positive cost push to the prices of Nitrotoluene in the market. In the USA, Natural gas prices are soaring as temperature drops recorded in the previous weak heightened demand for heating. This caused a rise in gas and LNG prices across the globe, forcing producers to shell more money into production. Nitrotoluene prices in the US continue to flare up as a consequence of energy prices and despite weak demand. Market players revealed that consumer inflation picked up in the month of September and is expected to expand in October. Demand continues to decline in the region of North America in the downstream dyes polymer industries, forcing Nitrotoluene producers to push prices down the value chain as prices in peer Asian markets also increased. Downstream textile and automobile industries are expected to face the brunt of rising Nitrotoluene prices. Chemical margins continue to deteriorate while refining margins improved on the back of weak prices over the previous two weeks.

Lastly, the problem of rising inflation translates into weak demand due to Central bank policy across the globe. US Fed, European Central Bank, Bank of Korea, etc., are looking to keep their policy stance ‘hawkish’ despite weak demand. In the latest edition, the IMF concluded that rising interest rates have forced down consumption while a significant oversupply of Nitrotoluene is expected in the coming months. ChemAnalyst’s internal investigative studies revealed that global expansions in chemical capacities are gradually yielding an oversupply of Nitrotoluene derivatives like TDI and polyurethane plastics is not being adjusted due to global inflation flaring up the prices, leading to rising inventories. Economists argue if producer prices continue to flare in commodities and interest rates are kept high, oversupply upstream in the market continues, and a high devaluation and decline in dollar or respective currencies across the globe is expected as the US continues to pile up debt.

ChemAnalyst researchers continue to argue for reducing key interest rates to stimulate demand for Nitrotoluene-derived products despite rising inflation. Nitrotoluene inflation is largely supply-side triggered by rising feedstock and energy prices in production and inventory stocks. Downstream TDI and polyurethane trade activities are to be stimulated through the construction sector.