China domestic TDI prices slump; outlook grim on weak demand

Source: ICIS News

2018/09/14

SINGAPORE (ICIS)--Domestic toluene di-isocyanate (TDI) prices in China plummeted this week as sellers slashed offers, at a time when downstream demand has been protractedly slow.

Prospects of an early recovery in prices may be remote, if demand does not pick up soon, market participants said.

On 12 September, yuan-denominated TDI prices closed at Chinese yuan (CNY) 27,000-28,000/tonne DEL (delivered) east China.

According to ICIS data, this is more than CNY 2,400/tonne lower than the week prior, and an even further cry from the year-peak of near-CNY 40,000/tonne seen in February.

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Market sources attribute the sharp week-on-week fall in TDI prices to frenzied selling by traders in the week.

As the extended National Day holidays from 1-7 October approaches, potential safety concerns about stockpiles of hazardous chemicals like TDI prompted some domestic traders to price cargoes down, in a bid to move some volumes and reduce stocks.

But this served to further weigh down sentiment, which has already been bearish for some time now, as earlier expectations of a typical summer hike in downstream off-take fell flat.

Unlike this time in past years, downstream furniture and mattress makers in China have been “cautious” in the procurement of raw materials like TDI, a China-based trader said.

Their apprehensions stemmed from concerns about how their export markets may be squeezed by ongoing trade disputes between China and the US.

Buying appetite for TDI is also capped because operations at the downstream factories are crimped by strict governmental controls for environmental protection purposes.

As it becomes increasingly clear that the controls are now the new norm, “it may be difficult for factories to ramp up anytime soon”, another trader lamented, which means buying of TDI will continue to be limp.

As domestic supplies may tighten on the back of upcoming plant turnarounds, this could provide some support – “perhaps a floor”- for yuan denominated prices of TDI in coming weeks, a Chinese TDI maker said.

Several plants, including the 100,000 tonne/year Gansu Yinguang plant in Baiyin, and the 50,000 tonne/year Dongnan Dianhua plant in Fuzhou, have already gone off-line for maintenance and may not resume operations until mid or late September.

Yantai Juli, which operates in Shandong two lines of total 80,000 tonne/year capacity, is also scheduled for a month-long turnaround beginning mid-September.

(Top image: TDI goes into making of foams and furniture. Photographer: Tahir Ikram)

($1= CNY 6.85)

Focus article by Ai Teng Lim

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