Europe June TDI contract prices steady on fairly balanced market

15 June 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European toluene di-isocyanate (TDI) contract prices are mainly steady in June, market players said on Wednesday. This is despite sellers’ attempts to raise prices due to lower toluene feedstock costs and fairly balanced market fundamentals, said the market players.

Producers stress the underlying need to recoup lost margins, following previous increases in feedstock costs and price erosion for TDI over a similar period, which are yet to be recovered.

Initial targets for June were previously pegged at €50-100/tonne ($72-145/tonne) for some sellers. However, these attempts had been largely thwarted by strong buyer resistance, a response predominantly to signs of lower demand in the downstream bedding and furniture sectors.

A lack of firm producer stance and the prospect of increasing global capacity over the next few months made price increases for TDI across the board difficult to achieve in June.

Despite this, some selective increases of €20-50/tonne were heard for TDI in the month, which would bring certain accounts in line with the rest of the market, where prices had previously been fixed for two to three months.

By contrast, reductions of €50/tonne were offered in a few cases for the month, according to a couple of buyers. This supplier is thought to have been higher priced than other sellers in May. However, this reduction is not seen as a reflection of the general direction of the market in June.

TDI prices for the month are largely confirmed within the existing range of €2,030-2,090/tonne FD (free delivered) NWE (northwest Europe), unchanged from May, according to ICIS.

A few suppliers maintain that they are not selling below €2,040-2,050/tonne or, according to one producer, even lower than €2,100/tonne. However, this is not widely confirmed in the market.

Prices up to €2,150/tonne were heard of by a few sellers, although these were seen to be exceptions rather than the norm.

There is some divergence of opinion about consumption in the downstream mattress and upholstery sectors. A number of players, including some sellers, acknowledge that demand is lower than expected. Some suggest that this is the seasonal slowdown, while others consider it to be earlier in the year and more pronounced than normal.

Reasons for this include economic constraints impacting upon consumer spending and good weather conditions switching consumer focus from indoors to outdoors.

High feedstock costs have possibly also stifled demand to some extent, said one buyer.

One producer said that demand in June is limited, but it attributes this to a number of public holidays and bridging days in Europe during the month. However, it remains optimistic that sales in July will be better.

By contrast, a few producers and one buyer said that they had not seen any seasonal slowdown in the bedding and furniture sectors. One of the suppliers said that sales in the latter are even higher than expected in some cases compared with year-to-date figures.

One buyer said that it had seen disappointing activity for bedding and upholstered applications in April and May and that there was an improvement in June, which it attributes to pre-production ahead of the summer holidays.

The general consensus was that demand from the downstream automotive and industrial sectors remains solid and robust, although players are closely monitoring demand over the next few months, especially with the approaching summer holidays in Europe and the possible effects on the region of a slowdown in Asia, one of the main export regions for automotive applications.

The Europe TDI market is usually fairly balanced in June with a tendency to lengthen over the subsequent months. In June, any supply constraints, linked to plant outages over the last few months, have been weighted against signs of lower demand.

However, there is some expectation that the market could become long in view of the approaching summer lull in demand and the prospect of new global capacity. In addition, the softer sentiment in the Middle East and Africa, a typical export region for Europe, means that more volumes are likely to remain in Europe.

In production news, Bayer MaterialScience’s TDI facility at Dormagen, Germany is in restart-mode following planned maintenance work, which began in mid-May. The facility has a nameplate capacity of 60,000 tonnes/year. Also at the site, there is a 30,000 tonne/year pilot plant, which uses the new gas phosgenation technology, as previously stated by a company source.

Borsodchem’s new TDI 2 facility at Kazincbarcika, Hungary is expected to go onstream in early July. The unit is set to have an initial utilisation of 160,000 tonnes/year, although this will be slowly ramped up to its nameplate capacity of 200,000 tonnes/year, said a company source. This is also likely to depend on market fundamentals.

The TDI 1 plant also at the Hungarian site, which has a nameplate capacity of 90,000 tonnes/year, will undergo planned maintenance work in July/August. This older unit is likely to be mothballed and remain on standby once smooth operations for the new TDI 2 facility are achieved as current poor margins do not justify running both units, a company source said.

By: Heidi Finch
+44 20 8652 3214

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