22 February 2010 17:20 [Source: ICIS news]
LONDON (ICIS news)--European methyl di-p-phenylene isocyanate (MDI) buyers are bemused by Bayer Material Science's (BMS) decision to restart its idled MDI facility at Brunsbuettel, Germany, amid ongoing poor demand in the construction sector and an oversupply situation, sources said on Monday.
A BMS source confirmed that its MDI Brunsbuettel unit came back online in mid-February and was producing again.
The seller declined to comment about precise operating rates or the reasons for the start-up. The Brunsbuettel MDI plant was idled on 1 April 2009 until further notice due to a lack of demand amid the poor economic climate.
Buyers and some resellers questioned the timing of the start-up: “The restart is a bit early due to the ongoing poor weather and market conditions,” said one MDI source.
Another buyer noted: “It was quite a courageous move. Maybe they anticipate that demand will come back, as there is the approaching spring season. However, there is already too much MDI in the market before the restart. Demand is still poor and there are no signs of improvement yet.”
A trader said: “The start-up is a big mistake, it is very strange. Demand is still poor. Everyday, suppliers are trying to push volumes,” which was echoed by a consumer, who stated: “The MDI market is as long as I have ever seen it.”
The source estimated that construction activity, one of the main outlets for crude MDI, was down by approximately 50% in the ?xml:namespace>
The customer added that it also expected a drop-off in the automotive sector, another outlet for MDI, following the end of the various government incentive programmes.
Buyers also anticipated that the BMS restart “would put pay to any targeted price increases”.
Sellers’ reactions were mixed. One producer considered the Bayer MDI restart to be good news, noting: “They are seeing the light at the end of the tunnel. They are seeing the crisis abating a bit.”
A few weeks ago, another manufacturer said it had no immediate plans to bring back online its mothballed MDI unit in the first half of 2010. The source had said it did not want to jeopardise the market balance. No further update on the status of this facility was available.
Regarding the proposed hikes of up to €200/tonne for MDI over the next few months, some sellers maintained a firm stance. One producer stressed that increases were vital due to the need for re-investment economics, alongside the benzene feedstock cost pressure.
Crude MDI prices were assessed in February between €1,470-1,510/tonne FD (free delivered) NWE (northwest
The BMS plant at
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