Isocyanates prices, markets & analysis

MDI
Updated to Q2 2020

Asia

Supply in Q2 was tight on scheduled maintenance at plants, which supported price gains in the domestic and Chinese import markets. Some producers who were grappling with decreased availability raised spot offers to regions such as southeast Asia in the earlier part of the quarter. Snug supply in Asia eased following the gradual return of MDI facilities from shutdowns, leading to greater spot availability.

Demand in Asia was mostly unchanged in Q2, with most buyers adopting a cautious approach towards cargo uptake amid bearish market conditions. Upstream crude futures’ volatility, the ongoing pandemic and weak downstream uptake contributed to the weak sentiment in the market. Comparing both MDI grades, polymeric MDI saw relatively stronger uptake amid better demand for refrigerators, whereas monomeric MDI was less sought after amid slowdown in the footwear industry.

Europe

The supply of MDI was reduced significantly in Q2 as producers slashed operating rates to minimum levels, and in some cases closed plants for maintenance. However, availability was generally ample until later in Q2 as the coronavirus pandemic brought parts of the foam producing industry to a standstill. Late in the quarter, accelerating demand and limited supply tightened the market.

A slump in demand brought about by the coronavirus pandemic and its associated impact on the economy pushed prices of MDI to record lows in Q2. Some segments of the market were less impacted by lockdowns and benefited from government stimulus programs. Construction, in particular, saw demand climb rapidly later in the quarter, supporting MDI demand recovery.

Middle East

PMDI supply in the GCC and broader Middle East market saw little changes through Q2. The impact of Asia-based producers shifting cargoes to China, amid stronger market conditions there, was offset by European cargo availability, with producers seeking to offload unsold cargoes.

PMDI demand in the GCC and broader Middle East market saw a decline during Q2 as nationwide lockdowns ground economic activity to a halt in the region and downstream consumer demand dried up. Limited demand came from the construction industries in the region, with construction projects seeing relatively smaller impact from the lockdown restrictions compared to other sectors.

US

MDI supplies remained comfortable throughout Q2 as macroeconomic setbacks and reduced production rates at downstream PU systems houses significantly limited MDI consumption needs. Import availability remained sufficient as most other regions of the globe were also struggling with macroeconomic weakness stemming from the coronavirus outbreak and subsequent containment measures.

Demand declined significantly during the quarter as coronavirus lockdowns caused many downstream manufacturing facilities to shutter their plants or reduce operations. Data from the American Chemistry Council (ACC) and Vault Consulting showed steep year-on-year declines in overall MDI consumption during April and May.

TDI
Updated to Q2 2020

Asia

Availability in Asia went down in Q2 on lowered operating rates and scheduled turnarounds. Most producers exercised caution with regard to production, preferring to keep inventories lean amid weak market conditions brought about by volatile crude futures and lacklustre demand due to the pandemic around the region. However, there were other makers who were producing material regularly, resulting in active price competition to liquidate stocks amid sluggish uptake among buyers.

Buying appetite among Asia buyers was sluggish in the earlier part of Q2, as the April market had been plagued by the spread of the coronavirus around the region. Crude futures also observed steep fluctuations, resulting in dampened buyers’ confidence as most traders, distributors and end-users sought to keep inventories lean amid fears of potential losses. Demand, however, picked up following the easing of lockdowns in Asia, with more buyers seeking to restock inventories.

Europe

Europe’s TDI supply was reduced in Q2 as demand diminished substantially, leaving the market lengthy. A structural oversupply was also balanced with reductions in operating rates by most producers, and despite the permanent closure of the BASF TDI plant in Schwarzheide there was no shortage of material. Later in Q2, improving demand tightened the market considerably.

TDI demand plummeted in Q2, as much of the region’s foam-producing industries closed amid the spread of the coronavirus. Demand for consumer items such as bedding and furniture also slumped as retail outlets were closed. The reopening of those outlets spurred some hope of a summer recovery later in Q2. Automotive industries that had consumed large quantities of TDI also ground to a standstill and only partly recovered late in Q2.

Middle East

TDI supply in the GCC and the broader Middle Eastern market tightened amid disrupted supply chains caused by the coronavirus pandemic. Several major producers shut their plants for annual maintenance and focused on the Chinese market where demand had rebounded. June saw a further tightening of supply as some producers began preparing for planned shutdowns in August.

TDI demand in the GCC and the broader Middle East region fell amid bearish market sentiment, caused by the coronavirus pandemic and lockdown measures. This was exacerbated by the traditional lull period during the Muslim fasting month of Ramadan, with prices hitting record lows. By the end of Q2 however, with lockdown restrictions largely easing, demand began to see some uptick with an increase in June enquiries.

US

US TDI availability has lengthened amid significant demand destruction stemming from the coronavirus outbreak and subsequent containment measures. Prior to the economic slump associated with the virus, TDI supply had been long globally as several world scale capacities came online over the past few years.

TDI demand declined significantly during the second quarter as movement restrictions and economic contraction reduced consumption from major TDI consumption sectors. Automotive production fell steeply during the months of April and May as major auto plants were shuttered by coronavirus-inspired sanitation concerns. Furniture and bedding demand also fell off during the quarter, although mattress demand approached pre-crisis levels prior to the end of the quarter.
 

Regional Outlook

MDI
Updated to Q3 2020

Europe

MDI supply has been improving as producers seek to take advantage of climbing demand, and it is expected to continue to grow as the region rebounds from impact of the coronavirus pandemic. Producer Borsodchem will carry out maintenance at its plant in Hungary in late July. Supply of high functionality MDI has been limited by low demand for pure or monomeric MDI.

Some accounts suggest construction related-demand for MDI has already recovered to levels seen in early Q2. Overall demand is expected to improve but will continue to face headwinds during Q3 as other outlets have been slower to recover.

Middle East

PMDI supply in the GCC and broader Middle East market is expected to be mixed in Q3, with maintenance shutdowns expected in August as well as a greater inflow of Asian cargoes due to firmer prices. Tighter supply may be seen in the run-up to the shutdowns as producers seek to shore up inventories.

PMDI demand in the GCC and broader Middle East market is expected to increase in Q3 amid a resumption in economic activity. Demand from the construction industry in particular is likely to be firm since many construction projects which were initially planned for Q2 have been pushed to Q3 due to the lockdown restrictions at the time.

US

Availability is likely to remain sufficient through the quarter as MDI consumption is expected to remain at below-normal levels. Demand recovery for MDI and downstream applications is expected to proceed slowly from the low points seen during April and May, with a return to January 2020 demand not expected this year.

Demand is anticipated to gradually improve from the multi-year lows seen in April and May as economic activity improves and lockdown measures ease. MDI is used primarily in the manufacture of durable consumer goods, which have experienced a sharper drop-off in demand than other sectors during this crisis and may take longer to recover.

TDI
Updated to Q3 2020

Europe

Supply of TDI is expected to remain limited in at least the first half of Q3 as plants struggle to lift output levels to meet renewed demand. Producer Borsodchem will carry out planned maintenance at its Hungary site, which could also reduce availability.

Demand is expected improve steadily over Europe’s summer period, which is usually a quiet season for the industry. Consumer activity has changed this year as people are spending less on holidays and more on home improvements, including replacing furniture and mattresses. The automotive sector is not expected to see much improvement within Q3, although there may be some incremental gains.

Midlle East

TDI supply in the GCC and other Middle Eastern markets is likely to be mixed in Q3. Production rates may see an increase on the back of stronger demand fundamentals. However, many plants are scheduled for maintenance shutdowns during this period, which might cause a tightening of supply.

TDI demand in the GCC and other Middle Eastern markets is expected to rebound in Q3 with an increase in enquiries already seen by the end of Q2. With lockdown restrictions largely easing and economic activity resuming, demand for downstream products such as flexible foams is likely to pick up. Moreover, many factories sitting on low feedstock inventories are expected to restock on TDI during this period.

US

US TDI availability is expected to remain sufficient throughout the third quarter as consumption levels are anticipated to remain well below the levels seen a year ago as economic activity gradually recovers from April and May low points. Consumption levels are expected to remain below normal through the remainder of the calendar year, keeping supply levels sufficient to meet demand.

US TDI demand is anticipated to gradually improve through the third quarter as movement restrictions ease and economic activity picks up. Automotive plants are in the process of restarting, but demand from the sector is expected to remain below 2019 thresholds for some time to come. Furniture and bedding demand has been improving at a more rapid rate and is likely to return to levels approximating pre-crisis levels.

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