ACC: Firm polyurethanes demand sparks price initiatives

Polyurethanes (PU) markets in North America are projected to grow steadily through to the end of 2014 and into 2015 as the US economy continues on its gradual, though still somewhat irregular, path to recovery. Expectations can be described as more optimistic and less cautious than they were only two years ago.

Key indicators in the US point to a more even economic expansion after timid and hesitant growth in the years immediately following the 2008 recession and a “dismal” 2009.

PU sector activity in what is a relatively mature US market continues to be in line with the recent, more confident overall economic trend, as evident in major flexible and rigid foam consuming sectors, mainly in automotive, construction, bedding and furniture applications.

US exports of PU products into Latin America are steady amid stable demand, with a market that is expected to recover gradually after a lacklustre performance in the first half of the year. The key Brazil market has been slow during the first half of the year, with demand dampened by the country’s focus on the football World Cup that ended in July, but activity is expected to improve during the second half on seasonality.

PU consumption for automobiles has been rising along with the increase in the number of vehicles sold. Also, more PU is being used in each car to provide a plusher and more sound-proofed ride, as well as to light-weight the vehicle to comply with fuel consumption mandates by replacing parts made with heavier materials.

Construction activity has been increasing, particularly in some US regions, such as Texas and previously-depressed Florida. New building projects drive demand for construction materials, particularly board stock spray PU foam (SPF), and for other PU-consuming products like furniture and appliances that fill houses, apartments and office buildings.

No longer are the slow US recovery, the eurozone economies, weak demand from China and other doom-and-gloom scenarios being articulated as issues of acute or chronic concern to the PU industry, or other industries, for that matter. Industry participants are getting used to working with the “new normal” and consider regular, moderate growth to be satisfactory. Sentiment appears more positive than it did two to three years ago.

MARKET DEVELOPMENTS

The improved outlook applies to both rigid and flexible PU applications and includes the pertinent PU feedstocks: toluene di-isocyanate (TDI), methyl di-p-phenylene isocyanate (MDI), polyether polyols and polyester polyols.

Global supply of isocyanates and polyols is generally described as ample. However, pockets of tightness occasionally appear.

Dow Chemical shut down its TDI plant in Freeport, Texas, in 2010, and its TDI unit in Camacari, Brazil, in late 2011, the company’s last two TDI plants in the world at the time. With the shutdown of Dow’s plants and with only two other TDI producers remaining in the US, concerns surfaced about adequate availability in the Americas.

Product was snug or finely balanced in the US at the time, but it became particularly tight for some months in South America, which was heavily reliant on US product. However, after South American TDI consumers discovered new suppliers, particularly from Asia, current supply in South America is mostly gauged as in balance with demand.

But even with easier supply from Asia, the US still remains a major source of TDI for Latin America. TDI imports from Europe have also recently started to arrive into the US for sales in bulk to customers which were previously reluctant to handle imports of break-bulk volumes.

With easing TDI supply throughout the Americas, amid moderate fluctuations in the cost of feedstock toluene, price increase initiatives for mid-2014 were not able to gain traction or garner industry support.

MDI availability is generally gauged as ample in the US. Four MDI producers in the US adequately supply the country’s requirements. However, supply issues surface occasionally, especially when more than one production plant goes into maintenance, frequently in the same season, as was the case during the summer of 2014.

Contributing to tight MDI supply at around mid-year, at least one producer was heard having problems restarting after its turnaround.

More than feedstock benzene costs, tightening MDI supply as a result of maintenance issues supported 8 cent/lb price increase initiatives for mid-year that succeeded partially, with prices assessed up by 5 cents/lb effective 1 July.

Increases targeted for 1 August were heard at 6 cents/lb and 8 cents/lb, depending on the producer. Buyers say that if fully or partially successful, these hike proposals would not be implemented before October, as many contracts are on a quarterly basis.

Polyether polyols and polyester polyols are in adequate supply in North and South America to satisfy gradually rising demand, according to industry participants. Demand is gauged as healthy for flexible and rigid PU foam products, as well as for the corresponding raw materials including polyols. However, price increase proposals for polyether polyols targeted for May or June lacked support from the key feedstock, as propylene prices have gradually declined since February. However, price increases have been announced for August propylene contracts, which will place upward pressure on polyols pricing.

By the end of July, US domestic TDI prices were gauged at $1.58-1.73/lb DEL (delivered) in bulk; polymeric MDI domestic prices were assessed at $1.44-1.59/lb DEL in bulk; and slabstock flexible polyether polyols at $1.34-1.64/lb DEL in bulk.

• Ron Coifman is a pricing editor with ICIS, based in the US office in Houston. He regularly reports on North American PU markets