OUTLOOK ’18: Asia, Mideast TDI to decline steadily in H1 on ample supply

SINGAPORE (ICIS)–Toluene di-isocyanate (TDI) prices in Asia and the Middle East are expected to fall gradually in H1 2018 as supply continues to recover from recent shortages while demand will likely pick up in the early months of 2018 after the year-end lull.

Many buyers had either been unwilling or were unable to secure TDI at firm prices in H2 2017.

This could create pent-up buying interest that may restrict prices from declining steeply.

In October 2017, TDI prices in Asia and the Middle East recorded fresh highs due to supply shortages, with average China/Hong Kong (HK) prices hitting a nine-year high at $4,650/tonne CFR (cost & freight) on 18 October.

In the week ended 2 November, the ICIS assessed ranges for TDI in the GCC (Gulf Cooperation Council), the East Mediterranean region and Iran increased to $4,600-4,700/tonne CFR (cost & freight), the highest on record since ICIS began tracking these prices.

In the weeks that followed, prices eased from their record highs and were hovering at above $4,000/tonne CFR China/HK and GCC but are still well above the levels from where they started in 2017.

TDI is used together with the flexible slabstock grade of polyols in the manufacture of polyurethane (PU) foam in furniture, upholstery and automotive seating.

Toward the end of 2017, market sentiment was rattled after BASF said it had supplied TDI with contaminated dichlorobenzene in August and September to 50 customers in Europe, the Middle East and Africa.

BASF said about 7,500 tonnes of TDI were contaminated and it then initiated a recall of the affected batches.

In the same month, Mitsui Chemicals & SKC Polyurethanes Inc (MCNS) encountered a technical issue at its 120,000 tonne/year unit in Omuta, Fukuoka prefecture, which pushed output down to around 70-80% of capacity. It recovered to 100% in early December.

Supply is expected to increase further, especially with the entry of Saudi Arabia’s Sadara Chemical Co into the TDI supply chain within the first quarter of 2018.

Sadara’s TDI cargoes are expected to be commercially available in early 2018, with some Middle Eastern customers having already received samples of the material.

The company is a joint venture between Saudi Aramco and Dow Chemical and it is expecting to produce 200,000 tonnes/year of TDI, 400,000 tonnes/year of polymeric methyl di-p-phenylene isocyanate (PMDI) and 400,000 tonnes/year of polyether polyols.

Looking further ahead to H2 2018, price declines may accelerate depending on when BASF is able to have a new reactor installed at its 300,000 tonne/year Ludwigshafen plant.

The unit is currently running at rates of less than 50% of capacity due to technical issues and is not expected to resume full production until sometime in the middle of the year.

Additional supply could also come from China, where Wanhua Chemical – the world’s largest methyl di-p-phenylene isocyanate (MDI) producer – is scheduled to start up a 300,000 tonne/year TDI plant in Yantai, Shandong province, in September/October 2018.

Market players do not rule out a sharp drop in prices in the latter half of the year but most are doubtful prices will re-visit the lows of early 2016, at least not until Wanhua’s TDI plant comes on stream.

Outlook article by Matthew Chong and Izham Ahmad