Global MDI outlook brightens as demand rises – US analyst

11 September 2012 22:03  [Source: ICIS news]

Global MDI outlook brightens as demand risesNEW YORK (ICIS)--Signs are pointing to an improving profit picture for methyl di-p-phenylene isocyanate (MDI) producers, with prices on the upswing in the US and Asia, along with steady pricing in Europe, an analyst said on Tuesday.

Frank Mitsch, analyst at US-based investment bank Wells Fargo, raised his third quarter earnings per share estimate on US-based polyurethanes producer Huntsman by 10 cents to 55 cents, bringing his full year 2012 forecast to $2.25, the highest on Wall Street.

“We are forecasting stronger-than-expected profits from the polyurethanes business. We believe strong MDI demand – volumes up 15% year on year in Q2 – continued into Q3, helped by northern Europe and Asia. Chinese growth in particular has been impressive, with Huntsman short product in China and all participants running at maximum capacity,” Mitsch said in a research note.

“Europe continues to grow double-digits, as MDI continues to take market share in the insulation market,” he added.

The analyst noted that overall for the company, CEO Peter Huntsman is most optimistic on the US because of cheap raw material costs and strengthening automotive, aerospace and construction markets.

US MDI prices are projected to increase in September, supported by healthy demand and higher feedstock benzene costs.

Price hike initiatives were heard from one producer at 6 cents/lb ($133/tonne, €104/tonne), effective on 9 September and from another supplier at 5 cents/lb, effective on 15 September, or as contracts allow, according to ICIS.

Yet one MDI buyer is projecting steady prices into September. Polymeric crude MDI prices were in the range of $1.04–1.09/lb as of 5 September.

Industry sources said MDI demand is healthy from major consuming sectors, such as automotive, spray polyurethane (PU) foam, lamination and board stock.

European MDI contract prices are expected to largely remain stable in September, according to ICIS. This is based on fairly balanced market conditions and a number of accounts which are fixed on a quarterly basis. Producers, however, are already targeting minimum hikes of €100/tonne as of October.

Views on consumption vary depending on source. Sellers maintain that demand is holding up reasonably well and is fairly in line with seasonal expectations for the time of year. Buyers, however, largely describe demand as flat and not as good as it should be in the downstream construction and automotive sectors.

MDI prices in Asia mostly continued to rise the week up to 5 September as tight spot availability for September created incentives for regional producers to implement hikes, according to ICIS.

Nonetheless, the price increments have been gradual so far. Market participants said that the recent rally has been supply driven. Further increments would require support from an improvement in demand, they added.

Additional reporting by Ron Coifman, Heidi Finch and Jingyi Chan

($1 = €0.78)

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