FocusChina TDI slumps 9% in 2 weeks, decline likely to continue

17 June 2010 05:53  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS news)--Spot toluene-diisocyanate (TDI) prices in China have plunged close to 9% this month with the decline likely to continue due to a lack of buying interest by the end-application foam market that was in a downtrend, industry sources said on Thursday.

Spot TDI prices were assessed at $2,550-2,600/tonne (€2,066-2,106/tonne) CFR (cost and freight) China Main Port (CMP)/Hong Kong on 16 June, down $150-180/tonne from last week, according to ICIS pricing.

“It is totally a buyer’s market now. Unless there is a bid sent to us, it is pointless for us to make an offer,” said a northeast Asian producer who is an active spot player.

TDI and polyether polyols are the raw material for the manufacture of foam, which are used in household appliances such as mattresses and sofas. June to the middle of August is traditionally off-season for the foams market, traders say.

TDI buyers were taking a wait-and-see stance as they expect prices to fall further, another northeast Asian maker said. "Demand is not really so bad,” he added.

However, a key supplier said sales were "really bad" for the past two to three months in both domestic and import markets.

Several producers said they were planning to cut the operating rates in order to avoid stock build-up.

“Traders in Hong Kong are still liquidating their cargoes, offers as low as $2,500/tonne CFR Hong Kong were heard today [Thursday],” a buyer based in Hong Kong said.

The restart of a local TDI unit and the high operation rates of the other local plants exacerbated the persistent supply overhang in China, players said.

Local producers were heard selling aggressively in order to mark their market shares, due to the anticipation of the start-up of a new 250,000 tonne/year unit in H1 2011 by Bayer MaterialScience, they added.

Nevertheless, foam makers were reluctant to buy more, as slow exports of finished goods to Europe and southeast Asia had resulted in the build-up of stocks.

“We are struggling ourselves to lessen our high inventories [of finished goods],” a foam maker said in Mandarin.

“We may start to buy [TDI] again in bulk if we see that the co-feedstock - polyether polyols had bottomed out,” a major foam maker in China said.

The company did not want to risk buying in a downtrend and was only purchasing on a need-to basis currently, he added.

“Some were saying that prices should stop at $2,400/tonne CFR CMP based on the current cost calculation, but who knows,” a trader based in eastern China said.

Spot TDI numbers have been falling since mid March from $3,100-3,180/tonne CFR CMP/Hong Kong, as the lull season in the downstream foam segment came earlier than expected and logistics issues witnessed before the start of the Shanghai World Expo, market sources said. (Please see graph below)

“Prices are unlikely to rebound, but [will] hopefully stabilize once the inventories of the foam makers are depleted,” a trader based in southern China said.

($1 = €0.81)

For more information on TDI, visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Ong Sheau Ling
+65 6780 4359

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