FocusPU margins tighten on energy, feedstock

11 June 2008 17:47  [Source: ICIS news]

By Landon Feller

HOUSTON (ICIS news)--Unprecedented energy and feedstock costs have driven US polyurethane (PU) manufacturers to raise prices by up to 20%, but most buyers were getting on board, industry participants said on Wednesday.

“At the end of the day, buyers in this industry can’t argue with $130 oil,” said one end user of finished foam.

The source added that with record energy prices, “it is a chemical producer’s perfect storm”.

Last week saw new records in crude oil and naphtha trading, while benzene and propylene contracts settled at record highs.

The cost-driven winnowing of production margins has generated upward price pressure on PU components such as isocyanate and polyol, which in June were nominated at 5-15% increases, buyers and sellers said.

Most buyers of PU intermediates and finished products were on board with the hikes and were expected to quickly pass higher costs to end users in hopes of avoiding the associated cost crunch, buyers said.

But a minority of intermediate buyers face significant challenges to absorbing higher costs and would continue to firmly resist, a producer said. This contingent could soon become a casualty of a tightening market, said the source, as sellers were prepared to accept for some demand destruction as they turn away price ideas at less than the proposed increases.

Buyers of intermediates and finished foams said the pass-through of costs would be contingent on North American consumers accepting higher prices on finished goods like furniture, mattresses, and shoes.

That could present a problem for sellers at the end of the value chain, a finished products maker said.

“After gasoline, American consumers are unwilling to accept any increases right now, and that is killing our margins,” the source said.

“This would absolutely mean inflation for American consumers,” said a producer, adding that chemical buyers may not yet have seen the full impact of higher costs that producers were facing.

In addition to raw materials like toluene di-isocyanate (TDI), methylene diphenyl diisocyanate (MDI) and various polyol grades, prepolymers and curatives were subject to hikes as producers announced immediate increases of up to 20%.

Among the US producers that have declared across-the-board hikes were Chemtura, Dow Chemical, Huntsman, PolyOne and Rohm Haas.

Isocyanates toluene di-isocyanate (TDI) and polymeric methylene diphenyl diisocyanate (MDI) in bulk were at 190-196 cents/lb ($4,189-4,321/tonne, €2,723-2,809/tonne) and 138-145 cents/lb, respectively, according to data from global chemical market intelligence service ICIS pricing.

Polyether polyol was available at around 126-134 cents/lb DEL (delivered) in bulk.

US suppliers of isocyanates and polyols include BASF, Bayer, Dow and Huntsman, Oxid and Stepan.

($1 = €0.65)

For more on toluene di-isocyanate visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Landon Feller
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