Construction sector keeps European crude MDI market afloat

Author: Fergus Jensen

2019/09/12

LONDON (ICIS)--Steady demand for rigid foams used for insulation in the construction sector has balanced the European crude methylene diphenyl diisocyanate (MDI) market in a period of lengthening supply, with no outages expected in the near future.

“[Crude MDI] demand is very good in insulation and construction - we've been receiving additional volume in orders,” one European producer said.

Bucking broader economic trends, Eurostat data shows construction improved in the second quarter in Europe, and this has been reflected in a range of petrochemical markets, including MDI.

Lower isocyanates prices may also have encouraged some end users to return to downstream polyurethane (PU) foam, after switching to PU insulation alternatives when prices spiked in 2018, although price volatility was still acting as a deterrent, a Europe-based MDI distributor said.

“It's a very attractive price region for the market compared to other insulation solutions like glasswool, rockwool or PE [polyethylene].”

Like other PU components, MDI demand has been hit hard by a reduction in output from the automotive industries in the wake of more stringent emissions regulations.

MDI supply length has been exacerbated by imports of raw material and PU systems and goods from Asia.

Macroeconomic factors, including a deterioration of manufacturing in Europe this year and gloomy headlines that have eroded consumer confidence, have also impacted demand.

The US-China trade war has imposed additional tariffs on isocyanates and PU products, adding pressure to the market.

After MDI prices hit record lows in February, there has been some recovery supported by supply concerns after the delayed restart of Huntsman’s MDI plant in Rozenburg, The Netherlands, as well as a turnaround at Borsodchem’s Kazincbarcika plant in July.

But whereas toluene diisocyanate (TDI) prices have been climbing in since June as a result of supply concerns in September and October, there has been little to indicate any MDI supply disruption over these months.

Feedback on pricing for September crude MDI contracts has pointed largely to rollovers for this month so far.

Several low double-digit gains were posted in July and August at the upper and lower end of the ICIS price range, which currently sits at €1,440-1,550/tonne on a free delivered (FD) northwest Europe (NWE) basis.

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MDI is consumed mainly in PU foams, which account for about 80% of global consumption. Rigid foams, the largest outlet for MDI, are used mostly in construction, refrigeration, packaging and insulation. MDI is also used to make binders, elastomers, adhesives, sealants, coatings and fibres.

Pictured: Residential construction site in Dortmund, Germany 
Source: Jochen Tack/imageBROKER/Shutterstock

Focus article by Fergus Jensen