Price and market trends: Europe TDI prices face greater downward pressure in June

14 June 2013 09:31  [Source: ICB]

Concerns over long term prospects for the region, as new Bayer and BASF capacities come onstream

Bearish sentiment in the European toluene di-isocyanate (TDI) market has become more pronounced this month with downward price pressure likely to be greater than initially thought, sources said on 7 June.

There is intensified competition among domestic sellers because of soft domestic demand, reduced export opportunities and the looming prospect of new capacities in Europe next year. The market players were talking on the sidelines of an event organised by Europur, which represents the European polyurethane (PU) flexible foam industry.

Price reductions of €30-60/tonne ($40-79/tonne) for TDI contract prices in June had been originally mentioned, but there are now suggestions that drops of €50-100/tonne may be more realistic. Values for June were either side of €2,100/tonne FD (free delivered) NWE (northwest Europe), while contract prices in May were at €2,150-2,200/tonne.

This price pressure is attributed to softer than expected demand for this time of the year, ­according to some players.

Traditionally, TDI demand into the main downstream bedding and furniture outlets enters the low season in June-July, but there are suggestions that this decline is more than just seasonal.

Year-on-year demand is estimated to be down by around 8-10% on average, mainly driven by soft macroeconomic conditions and resulting reduced consumer confidence and spending.

One TDI producer said lower June prices were due to reduced export opportunities to the ­Middle East and Africa amid strong competition from Asian suppliers in that region, rather than weak domestic demand

The producer said it had reasonable June volume requirements and it did not expect to see any seasonal lull until July and August. Demand dynamics can vary, however, among individual players, the producer added.

A buying source suggested that some players have also become increasingly competitive because of already-low demand and the psychological effect of capacity expansions for two main players due next year. Bayer and BASF plan to bring on stream two new world-scale capacities of 300,000 tonnes/year each in Europe, which this will also involve some replacing of existing capacities and other restructuring.

TDI players said supply was exceeding demand, despite lost production following Zachem´s acquisition by BASF in March.

Some sources said that the market should have been undersupplied because of this, but it remains well supplied to long, illustrating how poor underlying demand is in Europe. One supplier considers pressure in Asia as having a psychological effect globally, and was hopeful some plant shutdowns over the next few months may help to balance the market.

This, to some extent, would help to mitigate the summer lull in Europe over the next few months, the supplier added.

One buyer, however, said that view was "wishful thinking", highlighting the additional pressure of low export options during Ramadan in parts of the Middle East and Africa.

By: Heidi Finch
+44 20 8652 3214

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