Uncertainty creeps into US isocyanate, polyol hikes - buyers

10 July 2009 18:03  [Source: ICIS news]

HOUSTON (ICIS news)--US isocyanates and polyols negotiations wavered as talks of delayed, full and partial implementations for July and August clouded the final outcome of the nominations, buyers of polyurethane (PU) foam feedstock said on Friday.

“Things are still up in the air,” a buyer said. “Two producers are firm on price increases, but one has backed off the full hikes.”

Market players said numerous scenarios were present in the market.

One group of buyers said the toluene di-isocyanate (TDI) and polyol proposed 8-cent/lb ($176/tonne or €125/tonne) price increases for July had been implemented, but added that methyl di-p-phenylene isocyanate (MDI) increase proposals, also nominated for July, had actually been moved back until 1 August.

Other buyers said they had seen a 4-cent/lb implementation of recent TDI, MDI and polyol price hikes for July prices.

Some market players said most buyers pre-bought for July back in June, and they would not enter the market looking for product until August.

“July is traditionally a slow month,” a buyer said. “Most [buyers] bought in June, effectively pushing back price increases until August.”

Some market players had not concluded July or August contract negotiations and said there were some factors that could soften the producers' resolve to push through increases.

“The current crude prices could take the wind out of their sails, but the Bayer force majeure in Europe complicates the situation,” one buyer said.

Producers nominated price increase in June, citing rising feedstock costs and squeezed margins as the reason for hikes.

Values of natural gas, crude oil and aromatics, the building blocks for PU foam feedstock chemicals TDI and MDI, have increased steadily since the beginning of 2009, effectively putting the squeeze on producer’s margins.

As the fixed-cost-per-unit ratio rose in the first and second quarters, downstream demand remained lacklustre, and producers saw margins shrink.

“Feedstock costs are increasing and have exerted tremendous pressure on margins,” a producer said. “No producer is in a position to absorb those costs.”

Major US isocyanate and polyol producers include Dow Chemical, BASF, Bayer and Huntsman.

($1 = €0.71)

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By: Leela Landress
+1 713 525 2653

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