European TDI contract prices drop in August on weak market

10 August 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European toluene di-isocyanate (TDI) contract prices are mainly falling in August for a second month in a row, despite the uptrend in toluene feedstock values, because of weak market conditions and some aggressive selling, market players said on Wednesday.

Although price reductions were pegged between €20-50/tonne ($26-71/tonne) on average, TDI prices were frequently reported between €1,900-2,000/tonne FD (free delivered) NWE (northwest Europe) in August with the ICIS price range has been changed to reflect this - This represents a reduction of €50/tonne from the previous month.

Bi-monthly agreements for July-August had been put in place to cover the summer holiday period in some cases, which would have meant that prices would roll over into August. However, there had been mounting pressure from some buyers to re-negotiate prices lower amid subdued demand and an over-supplied market. This downward price adjustment had been confirmed by some buying and selling sources.

A few players reported a mix of rollovers and reductions in August, although price stability is not widely confirmed and therefore does not reflect the general market direction. One supplier said it had mainly agreed rollovers in August but had also had some minor price decreases for key accounts. The supplier acknowledges that it has a low stock position following recent delayed imports and volume restrictions, which is in contrast to the rest of the European TDI market which remains long.

Numbers up to €2,050/tonne were reported by one supplier in August. However, there is no other market confirmation to substantiate this level.

TDI consumption is seasonally slow due to the summer holidays, although there are also some concerns about underlying demand because of general economic uncertainty, which could limit consumer spending. Even in the few months preceding the summer, demand in the downstream bedding and furniture sectors is lower than expected, which is largely attributed to economic constraints.

TDI supply is plentiful and continues to exceed demand, particularly in view of the new capacity in Europe. Lacklustre domestic market activity and unfavourable export opportunities to the Middle East and Africa due to competitive prices, particularly from Asia and sluggish demand because of religious holidays, also meant that more material was available in Europe.

Looking to September, sellers stress the underlying need to increase prices following the successive toluene feedstock increases. Price hike targets are not yet widely forthcoming, although some initial indications centre on plus €100/tonne. Sellers are hopeful that demand will pick-up after the summer holidays, suggesting that there are already indications of some improvement in offtake in August versus July in northwest Europe.

However, buyers said they would resist any possible increases for TDI in September, despite the feedstock pressure, because of the weak market fundamentals which they are not convinced will improve in September given the unfavourable economic climate. They said they are also still struggling to pass on further increases downstream and cannot absorb any further price rises until they have done so.

($1 = €0.70)


By: Heidi Finch
+44 20 8652 3214



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