Asia chemical profile: TDI

09 November 2012 16:34  [Source: ICB]


Asia TDIToluene di-isocyanate (TDI) is mainly used in flexible polyurethane (PU) foam, which has outlets in upholstery, mattresses and auto seats. Other uses include rigid foams and adhesives, paints, concrete sealers, and as a crosslinking agent for nylon 6 and intermediates in PU coatings and elastomers.


Structurally, TDI is in oversupply in Asia, with total production capacity in the region reaching around 1.45m tonnes/year by mid-2012 as a result of ongoing capacity expansions that eventually outpaced tepid growth in demand, which is estimated by market sources to be around 1.10m tonnes/year at most.

For the past few years, Asia's manufacturing sector has been a key growth driver for the region's economies, with finished goods sold mainly to trading partners in Europe and the US. At the same time in China, the real estate sector was booming along with rising affluence, leading to optimistic domestic demand forecasts for property-related PU end-products of TDI, namely furniture and bedding items. Industry forecasts robust demand growth for Asia, especially China.

However, over the past two years, with Europe still struggling with a debt crisis and the US facing a feeble recovery, overseas demand for Asian exports has turned out to be weaker than expected. Correspondingly, downstream manufacturers in Asia have also moved to scale back their consumption of commodity chemicals such as TDI. Chinese government measures to cool inflation and property prices in 2011 affected domestic TDI consumption, leading Asian TDI producers to cut operating rates or idling units.


TDI prices suffered setbacks early this year, as the global economic slowdown dented export demand for downstream PU foam products from Asia, which in turn prompted foam manufacturers to cut factory production and raw material purchases.

In China, ample TDI spot availability stemming from extra capacity coming on board from 2011-2012 also increased the nation's self-sufficiency and intensified competition in the import sector, pushing TDI prices below $2,500/tonne CFR China Main Port (CMP), levels hardly seen since the global financial crisis.

However, regional TDI producers took swift action to recover eroded margins, including lowering plant operating rates to bring market fundamentals into balance. Less cost-competitive TDI producers even shut their facilities.

For the second half of the year, TDI prices have remained largely range-bound at $2,700-3,150/tonne CFR Asia. Buying sentiment remains cautious, with some buyers saying they will be covering only their immediate requirements.


The main route is the nitration of toluene to dinitrotoluene, followed by catalytic hydrogenation to toluene diamine (TDA), which is dissolved in an inert solvent and reacted with phosgene to produce a crude TDI solution. TDI can also be produced directly from dinitrotoluene by liquid phase carbonylation with o-dichlorobenzene. Germany's Bayer Material Science has commercialised a route that carries out phosgenation in the gas rather than the liquid phase.


While the global economy continues to muddle along, Asia's TDI prices are likely to remain within current ranges for the rest of the year, although further downside risks may arise if China's economy cools further.

Asia TDIAfter all, China has traditionally been the largest producer and exporter of downstream PU materials, with robust annual growth of over 7% in key end-use industries such as construction, automotive, furniture and electronics, altogether accounting for more than 60% of the total TDI demand in Asia. China is therefore still expected to remain a key growth area in 2012-2013.

Nonetheless, the Chinese government is unlikely to relax its property control policies, meaning the furniture and construction sectors are also unlikely to undergo any significant growth recovery in the foreseeable future.

In addition, the weak export sectors in many Asian economies this year have been increasingly weighing on domestic production, investment, and consumption. Hence, TDI prices have largely been propped up by supply-side factors, while overall demand has yet to show significant improvement. Industry growth forecasts are down to around 3-5% for FY2012.

By: Jingyi Chan
65 6780 4259

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