FocusNigerian TDI demand in 2012 to stay relatively flat from 2011

08 February 2012 07:13  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS)--Toluene di-isocyanate (TDI) demand in Nigeria is expected to remain relatively unchanged in 2012, as compared with last year, largely because of the limited buying power of end-consumers despite steady gross domestic product (GDP) growth, sources said on Wednesday.

Market players estimated the TDI demand in Nigeria - Africa’s largest market for TDI - was at about 18,000 tonnes in 2011.

Theoratically, demand should improve in line with the expected GDP growth at the high single digits, but the recent fuel price increase, internal civil conflict and a shift of preference to spring-based mattresses may keep the potential increase in demand relatively small, they added.

“Being a developing country, Nigeria’s GDP growth will yield a high single digit in 2012,” a Nigerian trader said, adding that GDP growth in 2011 was 7-8%, while in 2010 it was at 7.85%.

“Based on the GDP growth, downstream demand from the key foam sector should increase at the same rate, or even higher,” said a European trader who actively sells to Africa.

“Although the GDP paints a better picture, in reality, consumers have less purchasing power because of the fuel price increase,” said another Nigerian TDI distributor.

Fuel prices have increased by about 50% in Nigeria, which triggered a civil strike in mid-January, when the country closed for a week as a result, industry player said.

“Because of these strikes, the export route (of finished foam products) to neighbouring countries has been blocked, affecting trade,” a Nigerian foamer said.

There was also a shift in the production of flexible foam mattresses to spring-based mattresses, which cost less to make, weakening the demand for TDI, market players said.

TDI and flexible polyether polyols slabstocks are raw materials to manufacture flexible foams, which are used to make mattresses and furniture.

Also, volatile TDI prices have a negative impact on demand, industry players said.

Prices have on average increased by $100-150/tonne (€76-114/tonne) since January to hit $2,550-2,600/tonne CFR (cost & freight) Lagos on 7 February, they added.

“The sudden hike in prices forced the foamers to retreat to the sidelines and hesitate to procure fresh cargoes. Some foamers are running at reduced rates because of price uncertainty and bleak demand outlook,” a northeast Asian TDI supplier said.

“Considering all these factors, and subject to the global economy performance, the expected demand in 2012 may not increase or decrease significantly, but rather hover at a narrow range,” another European producer who sells to Africa added.

($1 = €0.76)

By: Ong Sheau Ling
+65 6780 4359

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