GPCA: Growing Middle East polyurethane markets drive regional investment

09 December 2011 16:16  [Source: ICB]

Caption: Robust growth is expected for the next five years for polyurethane (PU) raw materials in the Middle East, including polyols and isocyanates like toluene di-isocyanate (TDI) and methyl di-p-phenylene isocyanate (MDI).

The Middle East is an importer of isocyanates and polyols as there is no local production for either of the PU feedstocks. European and Asian producers are actively selling materials into the region, especially this year as supply of isocyanates has turned long because of new facilities in Europe and China amid sluggish domestic markets.

TDI cargoes originating from Asia and Europe each account for about 50% of Middle East supply. MDI cargoes originating from Europe have a market share of about 60−70%, with the balance covered by Asian products, according to industry estimates.

In 2011, the annual consumption of TDI and MDI in the Middle East, including Iran, is estimated by industry players at between 100,000 and 120,000 tonnes each, while for polyols the figure is put at 180,000 tonnes. Iran's consumption of TDI and MDI in 2011 is about 15,000−20,000 tonnes, with polyols at 30,000 tonnes.

Construction is a growing market for polyurethanes in the Gulf region Copyright: Getty

SENTIMENT REINS IN GROWTH
Most industry players expect the region's growth in demand for PU raw materials to hover around 5−6%/year from 2011 to 2015, half the rate experienced before 2010 because of the fear of recession in the eurozone and the political turmoil that has hit many Middle East countries since the end of 2010. However, others have higher expectations of about 10%/year, but only on the condition that the Arab Spring will end soon.

According to German PU major Bayer Material­Science (BMS), the global TDI-based PU market is growing at about 4−5%/year. The predicted growth is driven by two factors − population growth and rapid expansion in both soft and hard infrastructure.

The soft infrastructure is the human resource where professionals, equipped with the necessary skills, will help grow the Middle East into an important PU hub.

Polyols, with TDI, are widely used to produce flexible foam, which is the key raw material in the furniture, bedding, coatings and automotive sectors. Polyols and MDI form rigid foam, which has applications including automotive segments and in the manufacture of insulation and sandwich panels.

Flexible foam applications constitute approximately 70% of the PU market in the Middle East, excluding Iran, while rigid foam applications make up the rest of the PU market.

In Iran, the bulk of the PU business is dominated by rigid foam applications, particularly in the automotive sector, marking about 60−70% of the total PU market share, while the remainder is occupied by flexible foam applications in the furniture and bedding sector.

MIDDLE EAST DEMOGRAPHICS
Given the growing population in the Middle East, local housing projects are gradually multiplying, and so rigid foam for insulation purposes will constantly be in high demand. New housing will boost the consumption of flexible foam, as new furniture and mattresses will be in high demand.

In addition, a larger population will mean more vehicles on the road. In Iran, for instance, the automotive industry is healthy, and around 1m cars will have been produced this year. Growth is estimated at 5−6%/year.

The expectation of a growing market in the Middle East coincides with the producers' movement in expanding existing isocyanates and polyols facilities or even planning for new plants in the growing Middle East region. Saudi Arabia's petrochemical and titanium dioxide producer National Industrialisation Co hopes to start up a 120,000 tonne/year polyols plant in Saudi Arabia before the fourth quarter of 2014.

Saudi petrochemical major SABIC plans to bring onstream a world-scale isocyanates complex in Saudi Arabia by 2015, which will be a joint venture project.

In Europe, German global chemical major BASF is planning to set up the world's largest (300,000 tonne/year) single-train TDI plant at one of the company's integrated Verbund sites in Antwerp, Belgium, or Ludwigshafen, Germany. The unit will start production in 2014.

Another global major, Bayer's new 250,000 tonne/year TDI plant in Caojing in Shanghai, China, started commercial production this October.

However, isocyanates producers are showing concerns over the prices of PU raw materials in the long term. Supply is already long and isocyanates facilities, particularly TDI, are mostly running at reduced rates because of the squeezed or even eroded margins, according to industry sources. Additional capacities in the next five years may be too much for the global market to digest completely, they added.

Global isocyanates prices have been on a downward curve in the second half of 2011 because of persistent oversupply and weak downstream demand, triggered by the dull macroeconomic situation in the US and the eurozone.

More information on polyurethane pricing

Quote: Most industry players expect the region's growth in demand for PU raw materials to hover around 5−6%/year from 2011 to 2015

By: Ong Sheau Ling
+65 6780 4359

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