>Chemicals Sector (EMKAY)

Sustained recovery ahead.....

Mar’09 was marked by price as well as volume stability. In order to have more clarity on the price movement of various chemicals, we have increased the number of products from 19 to 33. Out of the 33 products in our universe, 12 products reported an increase in prices, 7 products reported a decline and prices of 14 products remained stable in Mar’09, indicating a stable price scenario. Emkay chemical index (covering 33 products) almost remained flat since Jan’09. Dealers are in consensus of the view that near term prices should remain stable. However, some volatility in prices cannot be ruled out. Volumes have stabilised with no significant increase on MoM basis in Mar’09. We believe that stable price scenario should continue while more products should report increase in prices in Apr-June’09 quarter. Volumes should pick up further on stable price scenario.

Price stability continues
We have increased the number of products under our coverage from 19 to 33. We saw price stability during Jan-Mar’09 period in most of the products after a sharp fall in Oct-Dec’08 period. Products reporting positive movement in prices have steadily been on the rise, with 7,10 and 12 products reporting an increase in Jan, Feb and Mar’09 respectively. Products with a stable price scenario also increased to 9, 13 and 14, respectively (Jan-Mar’09). Products reporting decline in prices reduced to 17, 10 and 7 during the same period. Higher proportion of increasing prices and stable prices in our product universe clearly indicates the stability in prices.

Restocking boosted volumes in Jan-Feb’09; expect stable scenario now
After a sharp decline in prices in Oct-Dec’08 quarter, led by lower demand and de-stocking, volumes picked up in Jan-Feb’09 period, mainly driven by restocking at dealer’s and consumer’s level. However, the scenario has stabilised now and dealers expect volume and price stability in the near future. However, some volatility in prices cannot be ruled out.

Outlook – Sustained recovery ahead
As mentioned earlier, we believe that prices of most of the products have bottomed out and should start showing some increase in prices. Many of the products have already shown some improvement in prices. We have seen increasing stability in prices as well as volumes of most of the products during Jan-Mar’09 quarter. We expect Apr-Jun’09 quarter to see a recovery in prices and volumes.

To see full report: CHEMICALS SECTOR