High input costs, weakening demand pose challenges, says Excel Ind

1 September 2022

Chemical producer Excel Industries Ltd has pointed to prices of key raw materials rising to "new highs" in recent weeks in its annual report for 2021-22 (Apr-Mar).

"In addition to the unfavourable input cost situation... we are seeing a weakening of demand in several key end user segments and geographical areas," the company said.

The company was also encountering a "customer pushback to further price increases"

The profitability of Excel Industries is likely to get impacted by these factors in the current and next quarter.

The company admitted in its annual report that it expected the business environment in the current financial year "to be very challenging."

An equity fund manager at a large fund house told Informist that yellow phosphorus prices have stayed elevated in the current quarter and that this was a major raw material for Excel Industries.

Excel Industries imports its key raw materials. Yellow phosphorus prices are steered by Chinese producers, who have access to domestic supplies.

The company noted this risk in its annual report. "China has a track record of taking advantage of this situation by pegging the price of the Raw Materials at a high level and at the same time pricing the downstream intermediates and finished goods aggressively," it said.

But current reports from China are pointing to temporary shutting down of yellow phosphorus manufacturers in Sichuan due to lack of power supply. Operational producers are reluctant to offer reliable quotations according to these reports.

Prices of yellow phosphorus in Yunnan and Guizhou regions of China have jumped by over 20% in the last one month, data from Shanghai Metals Market, a leading online metals data provider. The yellow phosphorus with benzene content of 99.9% or more was quoted at around 26,500 yuan per tn in early August and it was quoting at 31,900 yuan per tn.

Excel Industries produces specialty chemicals, intermediates and actives and sells to end user segments like soaps and detergents, lube oil additives, mining chemicals, polymer additives, agrochemicals and pharmaceuticals.