China, HK TDI import prices to change course on US-China trade war

Source: ICIS News

2019/05/15

SINGAPORE (ICIS)--Spot import prices of toluene diisocyanate (TDI) in China are likely to reverse from the current uptrend and head south amid an intense trade row with the US, sufficient supply and sluggish demand.

(Source: TI Media Limited/REX/Shutterstock)

Spot prices in the Chinese local market declined during the trading week, with discussions for spot lots hovering around Chinese yuan (CNY) 15,000/tonne DEL East China.

ICIS data showed that spot prices for TDI in the week ended 8 May were pegged at CNY15,500-16,500/tonne DEL East China.

Buying sentiment took a hit with the increase in tariffs from 10 per cent to 25 per cent on $200 billion of Chinese imports into the US, leaving China’s manufacturers reeling.

Most Chinese market players immediately took a cautious stance towards trade, preferring to observe the market further before committing to deals.

As such, local prices in the Chinese market softened, as lackluster demand led sellers to lower offers in an attempt to encourage cargo uptake.

“It is very demoralizing and we are feeling as if there is no clear direction in the way this trade war can go,” a China-based producer said.

“However, we are constantly mindful to not engage our competitors in a price war, as it will not benefit any party. Buyers are now generally reluctant to purchase, and whatever volumes purchased are significantly smaller compared with their usual volumes," he added.

The gloomy economic conditions also saw the heavy depreciation of the Chinese yuan against the US dollar, which sent China-based importers to the sidelines as it was now less cost-effective to import material as it was to purchase locally.

Previously, with upcoming scheduled turnarounds at some TDI units in the region, spot import prices snapped out of a relentless downtrend in late March and gained ground into April.

According to ICIS data, spot prices for TDI imports into China and Hong Kong bottomed out at an average of $1,660/tonne CFR (cost and freight) China and Hong Kong on 6 March, and climbed steadily to $1,900/tonne CFR China and Hong Kong as of 24 April.

This week, import activity largely came to a standstill, as most buyers were not confident in the current market situation.

“It is unlikely that buyers in China are willing to import May shipment lots in the US dollar today,” a China-based trader said.

“With the depreciated exchange rates of the yuan against the US dollar, it is not cost-effective to import. Buyers feel like they are better off purchasing locally," the trader said.

The longer wait for an import cargo’s arrival, as opposed to that of a locally-purchased lot, also dampened buying sentiment as there was the possibility of price fluctuation.

Most market players were not hopeful for the import market conditions in China going forward in May, with price declines widely acknowledged as possible.

Toluene di-isocyanate (TDI) is used in flexible polyurethane (PU) foam, which has outlets in upholstery, mattresses and automotive seats. Other uses include rigid foams and adhesives, paints, concrete sealers and as a crosslinking agent for nylon 6 and intermediates in PU coatings and elastomers.

Focus article by Jasmine Khoo

Click here to view related stories and content on the US-China trade war landing page.