27 September 2013 10:10 [Source: ICB]
About 80% of global consumption of methyl di-p-phenylene isocyanate (MDI) is in polyurethane (PU) foams, the largest outlet being rigid foams used in construction, refrigeration, packaging and insulation. MDI is also used to make binders, elastomers, adhesives, sealants, coatings and fibers.
Other outlets are in binders (for wood, foundry cores and rubber) and in microcellular products in automotive components.
The US market had experienced growth at higher-than GDP-rates, until the downturn in the construction and automotive sectors severely impacted MDI demand. Government stimulus packages, infrastructure projects and increased use of insulation to improve energy conservation were expected to help the market.
In addition, the US transportation industry accounts for nearly 22% of total consumption of PUs, according to the American Chemistry Council. Spray polyurethane foam (SPF) applications have been performing satisfactorily, according to market sources. Demand from the automotive sector is also healthy as auto sales continue to improve.
MDI demand in construction applications is growing gradually in the face of an irregular housing recovery, according to sources. Board stock and roofing applications are said to be performing well.
US MDI prices are steady, amid balanced supply and demand. No pricing announcements have been heard, suggesting prices will remains stable into October, according to sources.
MDI demand for automotive applications is gauged as healthy, while business in other applications is stable though not spectacular.
Feedstock benzene prices had eroded from a $5.16/gal record high in January 2013 to current levels at $4.40/gal for September contracts – a 23 cent/gal increase from August.
By mid-September, polymeric/crude MDI prices were $1.33-1.48/lb bulk and $1.43-1.58/lb drums, while pure MDI prices were $1.45-1.60/lb drums. Export spot polymeric/crude MDI was assessed at $1.02-1.09/lb FOB USG.
The main feedstock for MDI, nitrobenzene, is produced by the nitration of benzene in either a continuous or batch process.
The nitrobenzene is then hydrogenated to aniline, and the aniline is condensed with formaldehyde to form diphenylmethane diamine. The reaction conditions in the condensation step control the composition of the polyamine product.
The polyamine is reacted with phosgene in a solvent such as monochlorobenzene to yield an isocyanate mix. The resulting mix largely corresponds to the composition of the polyamine. Pure MDI is distilled off under reduced pressure and shipped in molten or frozen form. The market split is roughly 80% polymeric and 20% pure MDI.
BASF is currently constructing world-scale MDI and toluene di-isocyanate (TDI) production plants. An MDI plant with a capacity of 400,000 tonnes/year in Chongqing, China, is scheduled to start production in 2014. A TDI plant with a capacity of 300,000 tonnes/year is also planned to go on stream in 2014 in Ludwigshafen, Germany.
Integration into the BASF Verbund structure enables a high level of supply security and cost leadership in MDI and TDI.
US-based Dow Chemical has also announced that it could build MDI facilities in Saudi Arabia with production starting in 2015-2016.
In 2011, US-based Huntsman had discussed plans to build a 240,000 tonne/year MDI plant in Caojing, China. However, the various permitting processes have been lengthy, and if there is not much progress in the next few quarters, Huntsman could consider alternative sites, including Louisiana.
Delays in adding new capacity for MDI could be longer than what the market is expecting, Peter Huntsman, the company’s CEO, said in March 2013.
Several companies have plans to add MDI capacity in China and the Middle East, as well as other parts in the world. In all, the announcements represent about 44% of 2012 MDI capacity, according to a research note by Jefferies, released earlier in March.
If this new capacity is spread out over time, then the market can absorb it without a significant effect on utilisation rates, Jefferies said. Utilisation rates could fall if the new capacity is not added prudently.
However, MDI plants are complex facilities, as they rely on multiple raw materials and use phosgene as a feedstock, said Peter Huntsman. Unlike crackers, MDI plants are often the last facilities to be added to a complex, according to Huntsman.
Huntsman and Jefferies both noted that MDI demand has typically grown by 7%/year. Jefferies said MDI demand is growing because of share gains in insulation; growing popularity of oriented strand board (OSB) over plywood; and MDI’s increasing use in applications once reserved for toluene di-isocyanate (TDI).
Factors driving demand for MDI continue to be insulation in construction, automotive applications, synthetic leather for footwear and growth in the adhesives, coatings and elastomers market.
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