FocusMideast/Africa TDI prices to stay firm in March on short supply

24 February 2012 05:25  [Source: ICIS news]

By Ong Sheau Ling

TDI goes into production of foams used in furnituresSINGAPORE (ICIS)--Middle East and African toluene di-isocyanate (TDI) spot prices will continue to rise in March because of tight supply and high upstream benzene costs, industry players said on Friday.

The shortfall in TDI availability in the Middle East and Africa, which are import dependent regions, is a result of ongoing outages or turnarounds and a series of forthcoming scheduled shutdowns globally, they added. (please see table below)

Spot TDI prices rose by $150/tonne (€113/tonne) this week to hit an average weekly price of $2,925/tonne CFR (cost & freight) Gulf Cooperation Council (GCC). This represents a total price increase of $675/tonne or 30% since the uptrend began last November, ICIS data showed.

Consequently, TDI prices in the Middle East are currently the second highest after the US (please see graph below).

Most players are confident that the price uptrend will continue in the second quarter, with offers already surpassing $3,000/tonne CFR Middle East/Africa this week.

On 23 February, discussions in the GCC region were at $2,850-3,200/tonne CFR, with most transactions done at the low end of the range, industry players said.

In Africa’s largest market, Nigeria, northeast Asian cargoes were offered by producers as well as traders based in Dubai and Europe at $3,070-3,100/tonne CFR Lagos this week, with deals concluded at $2,950-3,050/tonne CFR Lagos, they added.

Discussions in other west and east African markets are priced higher than those in Nigeria, regional traders and foam makers said.

In Ghana, northeast Asian and European parcels were sold at $3,000-3,080/tonne CFR Ivory Coast, while negotiations in Kenya were at about $3,000/tonne CFR Kenya, they added.

“Discussion levels have been increasing by $100/tonne every week since early February. Foamers [foam makers] who need to restock are scrambling to get material,” said a Nigerian trader.

Half of the TDI producers based in Asia and Europe said they are unable to offer any spot March or April material to the Middle East because of plant shutdowns in their region, so that has further tightened supply.

BASF and Bayer MaterialScience are short of March and April spot shipments, with one producer’s supply likely to remain tight until June, sources close to the two companies said.

In addition, Japan’s Mitsui Chemicals has already sold out its March allocations, while Perstop and Borsodchem are still clearing their February backlogs and are uncertain about how much spot material they will make available for sale for March, company sources said.

A Dubai-based trader said it seems like there is no spot availability, as cargoes being offered are less half of their usual volume.

The short supply in South America has also squeezed availability in the Middle East and Africa tighter, industry players said.

“We have cut our allocations to the Middle East and Africa to cope with customers’ needs in Latin America,” said a South Korean TDI producer.

The tight supply has caused prices to rise despite the fact that demand is moderate, market players said.

A European trader added that there are few offers for European product in the African market, but their customers are mostly covered even until April.

“The market is so short that even though demand now is flat from the last quarter, prices still shot up,” a Nigerian foamer said.  

“Last year was a bad year for TDI makers. This is the time to recover some margins,” said a South Korean TDI maker.

“The high crude futures and benzene prices will keep TDI prices strong in the second quarter. We will not see prices easing off that soon,” a northeast Asian TDI producer said.

Crude futures were at around $108/bbl, while benzene prices were at $1,195-1,205/tonne FOB Korea on Friday.

($1 = €0.75)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

Author: Sheau Ling Ong

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