Ciech’s TDI business under pressure from rising oil derivative prices

29 April 2011 16:56  [Source: ICIS news]

LONDON (ICIS)--The toluene di-isocyanate (TDI) business of Polish producer Ciech is coming under prolonged pressure from rising oil derivative prices and increasing TDI capacities in China, Raiffeisen Centrobank said on Friday.

“Ciech continues to produce TDI at a small operating loss and the outlook is rather negative in the short term,” said Raiffeisen analyst Dominik Niszcz.

“They are also moderately afraid of the new TDI capacities to be launched by [Hungary's] BorsodChem. But the main problem is that its difficult to transfer raw material hikes on to their customers as most of the production they sell is on the spot market,” he added.

BorsodChem CEO Wolfgang Buchele confirmed in an interview with ICIS on 28 April that as part of an ambitious expansion strategy being pursued by the company's new owner, China’s Wanhua Industrial Group, BorsodChem would shortly become Europe's leading TDI producer thanks to substantially increased capacity.

However, like Niszcz, he cautioned that currently the prospects for TDI margins do not look strong.

According to Ciech, a plus for its TDI business is that margin falls attributed to climbing oil derivative prices should be limited because in February last year it signed a $500m (€335m), seven-year deal to contract two thirds of its required TDI feedstock, toluene diamine (TDA), from US group Air Products.

“The rising oil price will have the strongest impact on the remaining part of Ciech's TDA, the one third that is produced internally [with the buying in of raw material] largely based on spot purchases,” noted Niszcz.

Ciech's TDI capacity is 75,000 tonnes/year, with TDI sales mostly made to the furniture and automotive industries.

The output, produced by its Zachem subsidiary in Bydgoszcz, northern Poland, is to be bolstered by added capacity of 15,000 tonnes/year, an expansion that should go operational by 2013.

($1 = €0.67)

By: Will Conroy
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly