Amid escalating geo-political tensions due to the Israel-Hamas conflict, Archean Chemical, a leading bromine manufacturer, is garnering attention.

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The ongoing situation in West Asia is expected to drive up bromine prices, primarily due to the anticipated slowdown in bromine production in the Dead Sea region, which borders Israel and Jordan.

A significant portion of the world's bromine and brominated compounds is sourced from the Dead Sea, with the United States also being a key producer. Israel Chemicals stands out as the largest global producer of elemental bromide. Any disruption in bromine supply stemming from the conflict could trigger price spikes, as has been witnessed historically with such chemicals and compounds.

This situation could notably benefit other bromine producers, including Archean Chemical, as per the insights provided by IIFL Securities.

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Archean Chemical's current earnings per share (EPS) estimate for FY 2025 stands at Rs 55.2, assuming a bromine realisation price of approximately $3.8 per kilogram. However, any increase in bromine prices would translate to higher EPS for the company. It's worth noting that a $1 per kilogram rise in bromine realisations could boost EPS by 23%.

Brokerage firm JM Financial had recently initiated coverage on the company with a 'buy' rating and target price of Rs 785 a share.

JM Financial said India's bromine production has increased significantly from the Rann of Kutch, while the underground bromine reserves of China and the US are rapidly depleting, along with the receding water level of the northern basin of the Dead Sea.

ACIL is the largest and one of the lowest-cost Indian producers of bromine, and JM Financial expects it to continue to benefit from its brine reserves in Rann of Kutch in the next few years. The company's entry into bromine derivatives is also expected to improve its global presence.

The stock was trading at Rs 602.10 on the BSE, higher by 2.41 percent.

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(Edited by : Shweta Mungre)

First Published:Oct 9, 2023 3:50 PM IST