ACC: Middle East polyurethanes to benefit from EU/Asia capacity hikes

Toluene di-isocyanate (TDI) and polymeric methyl di-p-phenylene isocyanate (PMDI) markets in the Middle East are expected to see upcoming MDI and TDI plant expansions in Europe and Asia, leading to a less bullish sentiment in the third quarter of 2014.

The Middle East region largely depends on imports from Asia and Europe. According to market analysts, TDI and PMDI supply in the region will be ample amid stable demand.

China is one of the major exporters to the Middle East. In 2014, new MDI capacities totalling around 550,000 tonnes/year are scheduled to come on stream in the country, at Bayer Polyurethanes and Wanhua Chemical.

However, the net addition to capacity could be lower at around 350,000 tonnes/year due to the closure of old capacity at Wanhua, scheduled to take place during the year. Wanhua says that despite the closure of its old MDI plant in Yantai, northeastern Shandong province, it will still be able to produce up to 2m tonnes/year of MDI.

In Europe, Bayer MaterialScience is on track to start production at its new TDI plant at its Chempark Dormagen site in Germany. The new project will have a capacity of 300,000 tonnes/year. Isocyanates market sources in the Middle East and Asia say the new capacity will add pressure on the already long supply situation.

However, a source at Bayer MaterialScience indicated the company is not worried about an oversupply situation, as it is anticipating a consumption increase for TDI in the Middle East and an increase in demand in Africa.

The company has started the process for final shutdown of its existing 75,000 tonne/year TDI plant at Dormagen, which marks the first step in its transition period at the site.

BASF, another major supplier to the Middle East, is adding 300,000 tonnes/year of new TDI capacity at its Ludwigshafen site in Germany.

Meanwhile, flexible and rigid polyols prices in the Middle East will largely depend on economic performance and supply and demand in Asia and Europe, as suppliers in those regions first meet domestic demand before exporting material to the Middle East.

Spot polyether polyols prices in the Middle East, including the Gulf Cooperation Council (GCC) area, firmed around mid-June 2014, despite the seasonal lull which starts in June and lasts until the end of August.

After a downtrend from early May to mid-June amid ample supply, Asian and European suppliers firmed their offers following an explosion and fire at an upstream propylene oxide (PO)/styrene monomer (SM) plant at Moerdijk, in the Netherlands, operated by a Shell/BASF joint venture. Thus sellers have largely kept a bullish stance amid an anticipated material shortage in the Middle East.

Market sources say the outlook is uncertain in the near term, citing some tightness in the European market because of feedstock and supply shortages.

SADARA PU ENTRY AWAITED

Looking forward, polyurethanes (PU) players are also paying close attention to the construction of the Sadara Chemical chemical complex, a joint venture between Saudi Aramco and Dow Chemical, in Jubail Industrial City in Saudi Arabia. The $19.3bn project is expected to be completed by mid-2015, with full operations set to start in 2016.

Comprising 26 manufacturing units, the Sadara complex will include a world-scale cracker and production units for PU and feedstock PO. Sadara will market and sell its products to the Middle East market, while Dow will market and sell about 80% of what the Saudi producer will offer to the rest of the world.

Sources in the Middle East say the new PU capacities will ease the region’s dependency on imports, especially for polyether polyols, which is shorter in supply than isocyanates.

Market players in the Middle East and abroad have also been optimistic about Dubai winning its bid to host the World Expo trade convention in 2020, which is expected to ­increase downstream demand. The convention will see hundreds of countries display their latest developments in architecture and technology.

According to news reports, the emirate of 2.2m people, with its economy rebounding as local hospitality, property and construction industries flourish, expects to attract 25m visitors during the six-month show.

One downstream producer said it will be expanding its production capacity closer to the convention in anticipation of making more bedding, furniture and mattresses for the global event.

• Fahima Khail is an ICIS pricing editor, based in Singapore, covering the Middle East markets