US producers push for isocyanates, polyols price hikes

05 August 2009 21:06  [Source: ICIS news]

HOUSTON (ICIS news)--US producers aggressively pushed recent polyols and isocyanates price hikes and expect additional price increases in the future as surging feedstock values continue to squeeze margins, sources said on Wednesday.

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

Producers nominated price increases of around 8 cents/lb ($176/tonne, €121/tonne) for July and August in an effort to ease squeezed margins, but faced fierce resistance from buyers who said demand was too weak.

“With benzene even stronger, suppliers are pushing harder for increases in August,” a buyer said.

Producers cited higher feedstock values and energy volatility as drivers for proposed price increases.

“This market is so volatile,” the producer said. “No one expected benzene to settle as it did, getting close to $4.”

Values of gas, crude oil and aromatics, the building blocks for polyurethane (PU) foam feedstock chemicals toluene di-isocyanate (TDI), methyl di-p-phenylene isocyanate (MDI) and polyether polyols, have increased steadily since the beginning of 2009.

Spot prices for benzene, an MDI feedstock, have almost tripled since the beginning of 2009.

US August benzene spot prices were in severe backwardation with first-half August barges talked in a wide range of $3.65-3.85/gal on an FOB (freight on board) basis, against late-August discussions at $3.50-3.65/gal on a DDP (delivery, duty paid) Houston-Texas City (HTC) basis. September barge bids were lower by 30 cents/gal compared with late-August.

Propylene, used in the production of polyols, also followed the trend. US propylene producers nominated increases of  3 cents/lb and 5 cents/lb for August, extending an uptrend that began in January and has more than doubled prices.

Toluene, a TDI feedstock, also increased since the beginning of the year. US nitration grade toluene (NGT) price ideas moved higher for August, driven to $2.63-2.68/gal FOB US Gulf on the back of higher energy values.

Apart from higher feedstock costs  and soft demand this year, producers have also faced higher fixed cost per unit ratios, which further strained already-thin margins.

On concern for continued sluggish demand and an extended economic recession, many have chosen to reduce operation rates or permanently shut down production.

Bayer MaterialScience said their global MDI production was running at 60% of nameplate capacity, while TDI was at 70%. The company recently announced that it would close a small MDI plant, but would not comment further on the closure.

Isocyanates and polyols are feedstock chemicals used in the production of PU foam. TDI and MDI are two types of isocyanates.

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

($1 = €0.69)

For more on MDI or TDI visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Leela Landress
+1 713 525 2653

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