Poland's Ciech pressured by rising TDI oversupply - ING

16 September 2011 16:15  [Source: ICIS news]

LONDON (ICIS)--Poland-based Ciech is under sustained pressure from a rising oversupply of toluene di-isocyanate (TDI) in Europe, ING Bank said on Friday.

“In our view, the European TDI market could be hit by ongoing [global] overcapacity,” said ING analyst Adam Milewicz.

Noting that Hungary-based BorsodChem has started production at a 160,000 tonne/year TDI installation, while Germany-based Bayer MaterialScience should start production at a 250,000 tonne/year line in China this year and a 300,000 tonne/year line in Germany in 2014, Milewicz added: “Rising oversupply is the main risk for Ciech’s [75,000 tonne/year] business. Ciech could be the victim of expanding oversupply of TDI in the short term”.

“In our view, large capacity additions coming on stream [globally] over the next four years (at a forecast 14.7% CAGR [compound annual growth rate] for 2010-2014) will not be absorbed by forecast growing demand (at a 5.2% CAGR for 2010-2014),” the analyst said.

A further worry for Ciech is that pertrochemicals major BASF plans to build a TDI plant in Germany or Belgium, with total production capacity of 300,000 tonnes/year and a start date of 2014 or 2015, Milewicz said.

Ciech, Europe's fifth largest TDI producer through its subsidiary Zachem, would still be operating against far larger TDI players even after its own 15,000 tonne/year expansion is completed in 2013, ING's figures showed.

“The global TDI market is oligopolistic, with Bayer and BASF having a combined market share of 43% in 2010. The top five producers account for 65% of the global TDI market,” Milewicz said.

Another headache for Ciech is that the third quarter has seen retreating TDI prices accompanied by high input costs.

“In addition, the high cost of production technology means that Ciech could endure persistently weak TDI margins,” Milewicz added.

For more on TDI visit ICIS chemical intelligence

By: Will Conroy
+44 20 8652 3214

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