Europe chemical profile: MDI

21 May 2012 00:00  [Source: ICB]

USES

Methyl di-p-phenylene isocyanate (MDI) is used mainly in polyurethane (PU) foams. Rigid foams are mostly used in construction, refrigeration, packaging and insulation. ­Flexible foams are used in furniture, bedding and transportation.

MDI is also used to make binders, elastomers, adhesives, sealants and coatings.

SUPPLY/DEMAND

EU MDI capacityEuropean demand has held up reasonably well in Northwest and Eastern Europe in the first five months of 2012. However, consumption in Southern Europe remains subdued, as it has been more affected by economic woes. In the first quarter, demand was satisfactory, or even slightly better than expected for some, because of some production constraints, a mild winter season in the construction sector and the need to replenish inventories following destocking in the second half of 2011.

Demand is expected to pick-up in the second quarter, in line with the onset of high season in the construction industry. However, there is still some uncertainty about how much investment will be channelled into construction projects, in view of heightened economic concerns.

Despite BorsodChem's expansion, which raised nameplate capacity at its M2 plant in Hungary from 150,000 to 240,000 tonnes/year in 2011, the market has remained largely balanced with reasonable demand, some production adjustment and plant outages.

PRICES

With the exception of a rollover in January 2012, European MDI prices have increased successively between February and April, driven by high upstream benzene costs and the need for margin recovery.

Crude MDI prices rose by €160-200 ($203-254/tonne) between January and April to €2,010-2,150/tonne FD (free delivered) WE (Western Europe). Over the same period, pure MDI saw larger hikes of €200-205/tonne, taking prices to €2,130-2,200/tonne FD WE in April. The larger increases were attributed to more restricted supply for pure MDI because of its lower yield, as well as seasonally high demand in the footwear sector in the first few months of the year.

In May, price levels are stable to firmer, depending on contract type, as a result of ongoing feedstock cost pressure and balanced-to-tight supply.

TECHNOLOGY

MDI is made by hydrogenating nitrobenzene to aniline, which is then condensed with formaldehyde to form diphenylmethane diamine. The condensation step controls the composition of the polyamine, which is reacted with phosgene in a solvent to yield the isocyanate mix. Pure MDI is then distilled off the MDI stream under reduced pressure.

Crude MDI equates to around 80% of the European market, while about 15-20% is pure MDI.

Germany's Bayer MaterialScience (BMS) has developed a more efficient process for producing aniline, an important intermediate for MDI. According to BMS, in the conventional process, the reaction between nitrobenzene and hydrogen to form aniline takes place in a reactor block, which is made up of several tubes; with the new technology, one large vessel is sufficient. Instead of using a complex reaction with heat transfer oil, the new process involves the heat being channelled away with the gas stream, removing the need to exchange heat with the environment. The new process is already in use by BMS in China.

OUTLOOK

European demand growth is expected to be around 5-6% per year, according to producers, driven by increasing legislative requirements for insulation in Europe. China is expected to continue to drive global growth, estimated at 7-8%/year. China's growth is, however, likely to be less than originally anticipated because of economic concerns.

EU MDI pricesThere is talk that global supply may increase in the second half of the year, based on softer growth in China coinciding with capacity additions in Asia - specifically Yantai Wanhua's plans to debottleneck capacity in Ningbo by 50% to 1.2m tonnes/year during a shutdown in June. South Korea's Kumho Mitsui is also due to expand capacity from 150,000 to 200,000 tonnes/year, with completion likely by late June.

Players suggest the new capacity could lead to more exports, possibly to Europe, if Asian demand - particularly in China - does not improve. There is market talk that BASF is likely to debottleneck its facility in Antwerp, Belgium, by about 15% during annual maintenance in September/October.

Other projects include Dow Chemical's and Saudi Aramco's $20bn joint venture - Sadara Chemical - which will comprise a world-scale cracker and derivative units, including isocyanates, at Jubail Industrial City, Saudi Arabia. First units are due on line in the second half of 2015, with all plants to be operational in 2016.

BMS also plans to convert its 125,000 tonne/year toluene di-isocyanate (TDI) unit at Brunsbuttel, Germany, into a 220,000 tonne/year MDI facility over the next few years as part of its restructuring plans.


Author: Heidi Finch and Elaine Burridge



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