Isocyanates prices, markets & analysis

MDI
Updated to Q2 2021

Asia

Asia’s cargo availability for MDI decreased in the quarter on the back of planned maintenance and unforeseen outages in the northeast Asian region. The polar storms at the US Gulf Coast in February also weighed on supply in Asia in April. There were limited capacity start-ups for MDI in the region in Q2.

Amid the cold snap seen in the US in February, buying appetite remained healthy in the earlier part of Q2, as buyers sought to secure material amid concerns of scarcity. However, demand soon waned with the resurgence of COVID-19 cases in the region. Pandemic-related lockdowns in south and southeast Asia contributed to the sluggish cargo uptake, especially since price fluctuation was seen in the related Asian polyols market. This weighed on buyers’ confidence.

Europe

The market remained predominantly tight in Q2 with some patches easing slightly in June. Production issues at several plants in Europe maintained a significant constraint on supply, while limitations on output from US plants increased exports and impacted domestic availability.

Demand remained robust in Q2 as construction-related consumption of rigid foams saw continuing strength. An ongoing boom in home improvement and construction was partly a result of government incentives aimed at spurring economic growth that was impacted by the coronavirus pandemic. In some cases, shortages of polyols impacted the production of rigid foams and other applications.

Middle East

Supply of Asian cargoes to the Middle East increased in April, exerting downward pressure on the market. Slow cargo uptake in Asia led sellers to divert material away from weaker Asian markets and towards regions like the Middle East and Europe, due to higher netbacks.

Demand for PMDI in the Middle East was subdued in Q2, as construction and manufacturing activities slowed during the Muslim fasting month of Ramadan. In the UAE, the high turnover of rebonded mattresses, particularly those used in medical centres and hospitals, provided support for foam demand.

US

Supplies remained tight throughout Q2 amid persistent shortages in chlorine supply and lingering production problems from the February winter storm along the US Gulf Coast. Supply issues along with relatively high prices in North America relative to other global regions encouraged a greater volume of imports, with the US flipping from a net importer after being a net exporter during 2020.

Demand remained strong through Q2. PMDI consumption remained at elevated levels as strong demand for consumer durables boosted demand from the appliance, construction and automotive industries. Improving retail sales later in Q2 boosted demand for MMDI after MMDI demand lagged behind PMDI demand in Q1.

TDI
Updated to Q2 2021

Asia

Cargo availability was mixed. Supply fell on one hand following the unplanned maintenance at a northeast Asia-based facility. Most other units were understood to be running as per normal. However, due the existing shortage of containers in the shipping sector in China, deep-sea trade became difficult for some Asian TDI producers. That lent a boost to supply, balancing out shortfall brought about by maintenance.

Buying appetite among regional buyers was heavily dampened by lockdowns, manpower woes and logistical restrictions which came about with the resurgence of COVID-19 in various parts of Asia. The PU market also entered its seasonal lull demand period. Volatility in the related polyols and PO markets also weighed on TDI buyers’ confidence.

Europe

Availability of TDI improved as demand was constrained and flexible foam consumption faced a seasonal decline. Later in Q2, the restart of output from the BASF plant in Ludwigshafen, Germany, the region’s largest TDI plant, further added to supply, which was described as ample. Global constraints on supply have eased, although shipping and logistics issues continued to cause headaches.

Demand constraints continued in Q2 as flexible foam production faced an acute shortage of polyether polyols despite fairly healthy demand for mattresses and sofas early in the quarter. Demand for foam for use in automotive industries also continued to be impacted by an ongoing shortage of semiconductors. Later in the quarter, TDI consumption was dented by a seasonal slowdown in flexible foam demand.

Middle East

Supply of TDI from China was ample in Q2 due to a slowdown in the Chinese domestic market. Producers looked to liquidate their stocks and offered more material to the Middle East due to weak sentiment in the southeast Asian markets, amid a surge in COVID-19 cases in some countries like Malaysia, Indonesia and Thailand. Shipping issues, such as shortages in vessel space, and firm freight costs were faced by many sellers.

Demand for TDI in the Middle East was tepid since April, with buyers largely adopting a cautious approach to procurement. A slowdown in demand was observed during the Muslim fasting month of Ramadan as business activity reduced. Demand picked up gradually after Ramadan, but buying remained limited due to the downward pressure on the market. This continued until end-June, leading to lower-than-usual volumes of material being traded.

US

Supplies eased somewhat in Q2 relative to Q1 as the impact of winter storm related issues eased. Inventory levels rose during Q2 as a shortage of flexible foam polyols limited TDI consumption, although supplies tightened again later in the quarter following some renewed production issues at US TDI plants.

Demand remained healthy in Q2 as consumption from the automotive and furniture and bedding sectors remained strong. A shortage of microchips resulted in some cutbacks from the automotive sector but demand from other consumer durables helped offset reductions in demand from automotive applications.

Regional Outlook

MDI
Updated to Q3 2021

Asia

Supply could rise as some plants complete planned maintenance and resume regular production. However, events such as the 100th anniversary of the Chinese Communist Party had brought about environmental checks in early July, which resulted in a temporary reduction of supply in China. A major China-based maker’s Yantai-based MDI facility is scheduled for maintenance in July, which will likely weigh on cargo availability.

Seasonal demand is typically expected to increase in August. With spot prices in Asia having shown signs of bottoming out towards late June, some market players expect buyers to replenish dwindled inventories, after maintaining a cautious approach towards procurement when prices of PMDI and MMDI fell for most part of Q2.

Europe

Supply tightness is anticipated to continue or increase through Q3, with ongoing production issues and scheduled maintenances further limiting the ability of suppliers to rebuild depleted inventories. US production issues are expected to maintain demand for exports and further constrain domestic supply.

Demand for crude MDI is expected to remain strong in the coming months and outpace supply in many cases. There are no signs that construction-related rigid foam demand is easing, and seasonal conditions and reduced travel due to the ongoing coronavirus pandemic are seen supporting additional consumption. MMDI demand may see some improvement if and when footwear and automotive demand improve.

Middle East

Supply of PMDI is likely to reduce as a major Asian producer conducts a month-long plant shutdown. Freight costs and shipping-related issues will continue to plague the market, impacting the availability of material to the Middle East.

Demand for PMDI in the Middle East is likely to stay tepid due to a slowdown in construction activity during the summer months of July-September. Some stability in the PMDI market was observed in early July due to mixed market fundamentals. Demand in applications such as construction and medical mattresses going forward will be the main factors.

US

Supplies are expected to ease during Q3, with some participants anticipating that the market will rebalance in Q3 after several quarters of supply tightness. Participants will be monitoring the Atlantic hurricane season as a major storm impact on the US Gulf Coast could cause supply disruptions.

Demand is set to remain high through Q3, supported by a strong US manufacturing sector and healthy GDP growth rates. Demand for durable consumer goods is expected to remain strong, although spending on manufactured goods could slow as more consumers shift spending back towards services with coronavirus-related movement restrictions easing.

TDI
Updated to Q3 2021

Asia

Cargo availability is expected to fall on planned maintenance at a major Chinese producer’s unit. The 100th anniversary of the Chinese Communist Party has also brought about reduced run rates at some upstream facilities amid environmental checks, which are set to drop supply. Persistent shortage of containers is set to continue weighing on deep-sea trading activity from Asia to places like Europe, or the US.

Cargo uptake for TDI is expected to improve as the market gradually moves out of the seasonal demand lull period. Persistently cautious approaches towards procurement would have depleted buyers’ inventories, leading to expectations of restocking activity. With yuan-denominated prices in China for PO and polyols snapping out of their downtrend to stabilise from mid-May, sentiment for TDI is set to be supported.

Europe

Supply is expected to continue to improve in Q3 as the BASF plant in Ludwigshafen ramps up output. Despite planned maintenance at the BorsodChem plant in Kazincbarcika, Hungary, supply is expected to remain fairly ample due to slow demand during this period.

Demand for TDI used in flexible foams is expected to remain generally weak in Q3, as many foam producers and factories around the region are closed for summer holidays. While demand is expected to improve in September as industries prepare for winter consumption, some uncertainties remain as global supply chains have faced unusual disruption over the past year due to the coronavirus pandemic.

Middle East

Supply of TDI is likely to be sufficient going into Q3 2021. Bearish southeast Asian markets could see more material available for the Middle East region. However, shortages in vessel space and mounting freight costs mean Asian producers will continue to face difficulties in shipping material. However, this may be balanced by weak demand in the Middle East market. European supply is likely to increase in August, reducing the pressure on Asian imports.

TDI demand may remain lukewarm. Some increase may be seen as buyers look to purchase material ahead of the Eid ul-Adha holiday in end-July. Overall, supply continues to outstrip demand and a bearish sentiment shrouds the Middle East market. Slow demand for foam in the summer months of July-September is also likely to weigh heavy on TDI demand.

US

Supplies are expected to ease in Q3 following some renewed tightening late in Q2, with some participants anticipating the market will rebalance following several consecutive quarters of reduced availability. Participants will be closely monitoring the Atlantic hurricane season as a major impact on the US Gulf Coast could cause further supply disruptions.

Demand is expected to remain strong into Q3. Automobile producers will be seeking to make up for lost volumes as the microchip shortage is expected to ease in Q3 while demand from the furniture and bedding sector is anticipated to remain firm.

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