Asia PMDI may bottom out soon, but MMDI stays under fire on thin demand

SINGAPORE (ICIS)–Polymeric methyl di-p-phenylene isocyanate (PMDI) prices in Asia may be bottoming out after near 40%-plunge over three months, as supplies tighten.

But downside potential for monomeric MDI (MMDI) prices is still high, as buyers continue to see MMDI as “disproportionately overpriced” vis-à-vis PMDI, a regional trader said.

Discussions for PMDI were in the $1,450-1,500/tonne CFR (cost-and-freight) China range this week, market participants said.

This is broadly similar to the week prior, albeit within a narrower range.

It is may be the first time in the last three months that PMDI prices did not break new low grounds, week-on-week.

Sellers were hopeful that this meant prices are bottoming out for PMDI, especially since the spread to feedstock benzene has narrowed significantly, “squeezing margins substantially”, said a regional producer.

Sellers see potential pricing support from tightening supplies, as some MDI plants started to shut for maintenance or ran at lower rates.

A 400,000 tonne/year plant in Ningbo by China’s Wanhua Chemical, went off line earlier this week for a 22-day maintenance.

In South Korea, Kumho Mistui Chemicals Inc (KMCI) is also operating its 300,000 tonne/year MDI line in Yeosu at lower rate of around 75% as supplies of feedstock carbon monoxide slow down on the back of upstream maintenance work.

But demand remains “structurally weak”, a regional trader said, with buyers, especially those in China, still shying away from bulk purchases.

A key PMDI application is in the manufacture of insulation panels used in electrical goods like refrigerators, and market players said that refrigerator sales have been limp in China, affecting therefore off-take rate of PMDI.

Activities in the construction sector, another major PMDI application, are also slowing down with the onset of colder winter months in China.

As long as there is no discernible uplift in demand, the prospects of a near-term recovery in PMDI prices are dim, even if prices do not fall further, market participants said.

But unlike PMDI, monomeric (pure) MDI prices are still shedding, as discussions on November MMDI shipment into China slipped way below $2,500/tonne CFR China this week, market participants said.

On 31 October, MMDI settled at an average of $2,625/tonne CFR China, according to ICIS data.

Buyers deemed the current spread between MMDI and PMDI “too wide”, a regional trader said, and are motivated to keep MMDI bids low, in an effort to narrow the gap between the two MDI grades.

Sellers are “caught in a bind”, the same trader said. On one hand, they are under pressure to keep moderating MMDI offers so as to stimulate and preserve thinning buying interest.

On the other hand, producers would want to hold their grounds firmer on MMDI prices as much as possible, so as to make up for losses in PMDI and protect margins.

Typically, MMDI accounts for 30% of MDI output, and PMDI takes 70% share.

That said, as long as demand stays limp, buyers would remain resistant to high MMDI pricing.

Focus article by Ai Teng Lim