OUTLOOK ’19: Europe isocyanates, polyols fixed on demand as overcapacity haunts markets

LONDON (ICIS)–Demand levels will be of prime interest to European isocyanates and polyols market participants in 2019 after optimistic conditions for 2018 were dampened.

The addition of new capacities in 2019 for methyl di-p-phenylene isocyanate (MDI) and toluene di-isocyanate (TDI) will also add some pressure to those markets.

Low consumption for crude MDI and TDI followed a firmer trend for both markets in 2017 that led end users to purchase competing downstream products instead.

Pricing consequently dropped for much of 2018, with the crude MDI contract price mid-point specifically softening in November to the lowest level assessed since April 2010.

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Although polyols contract prices were often flat in 2018, order book volumes were low in the market for much of the year as well.

This was as polyols produces flex foam in combination with TDI, and the rise in price for the latter product reduced purchasing interest for the derivative.

“Normally, January is one of our strongest months … But, for the moment we don’t see additional orders [for January 2019],” said an isocyanates and polyols buyer.

Isocyanates market participants originally expected that a drop in contract pricing would elicit a boost in demand.

However, this had not happened by the end of 2018 and expectations as to when consumption could revert for all three products are unclear, with uncertainty likely to stay for some time.

“You see that the final consumer is not buying too much … The situation is a high level of uncertainty for the coming months,” said a polyols supplier.

Producers began to point at their margins and indicated that the downwards price trend for isocyanates and flatter pricing for polyols was making their business difficult.

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In the TDI market particularly sources conceded that global oversupply could open the market to more volatility.

Furthermore, such structural length may prove a dominant topic in 2019 once again.

Sources said China’s Wanhua Chemical was set to reach on-spec production at its 300,000 tonne/year TDI Yantai plant by late 2018 or early 2019, which would only add to overcapacity.

Moreover, further supply is coming online in all three markets globally in 2019.

German producer Covestro, for example, is scheduled to convert an idled TDI plant into a MDI facility at Brunsbuttel.

This will double MDI capacity at Covestro’s Brunsbuttel site to 400,000 tonnes/year.

All these additions to supply only make demand levels more crucial to future pricing discussions.

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MDI is used mainly in polyurethane (PU) foams. Rigid foams are mostly used in construction, refrigeration, packaging and insulation.

TDI is mainly used for the production of PU flexible foams used in upholstery, mattresses and automotive seats.

Focus article by Pavle Popovic