Cost hikes, shortages create headaches for Europe PU industries

Author: Fergus Jensen

2020/10/15

  • October isocyanates contracts increases of up to €300/tonne
  • Polyols contracts climb up to €150/tonne
  • Shortages seen in polyols, TDI, crude MDI markets
  • Strong flexible, rigid foam demand seen continuing in November
  • More delays, order cancellations expected in coming weeks

LONDON (ICIS)--Supply disruptions rocked the Europe polyurethane (PU) market this week, where flexible and rigid foam producers have grappled with shortages of isocyanates and polyols feedstock, strong demand and sharp increases in pricing for October.

“It’s more than tight,” one Europe-based PU foam producer said. “Today we cannot produce, nor tomorrow.”

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October isocyanates contracts were assessed this week with increases of up to €300/tonne from September. Polyols October contracts climbed to levels not seen since 2015.

TDI
The toluene diisocyanate (TDI) market was shortened further this week, after producer Covestro declared force majeure on product in Europe, the Middle East and Africa, following a pump failure at its Dormagen plant. That follows a force majeure in place on production from the Ludwigshafen plant operated by BASF, the region’s biggest producer.

Foam producers have been struggling with delayed feedstock orders, and in some cases have had to cancel their customer orders.

“Everybody is getting pissed off,” said one Europe-based isocyanates reseller, referring to the recent price hikes and order cancellations. “Contracts are being cancelled everywhere.”

The recent sharp increases in flexible polyurethane foam feedstock costs are also creating difficulties where those increases cannot immediately be passed through to customers.

“We cannot eat every price increase,” one foam producer said, noting that there were concerns foam buyers would switch to alternative products like latex and spring mattresses.

“The problem then is we need to regain our market.”

The shortage of stock means some plants will be shut despite the current high demand situation.

“The decision now is which plants to shut,” a Europe-based foam producer said. “There’s a big lack of material and it’s almost impossible to get material from outside sources.”

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October TDI contract prices were assessed this week jumping €300/tonne at both the upper and lower ends of the range, to €2,250-2,600/tonne FD (free delivered) W (west) Europe.

It was the fourth consecutive monthly increase in TDI contract prices, which are now at levels last seen in 2018. The range is now €850-1,150/tonne above levels hit in June of this year.

Feedback on October contracts was heard between €1,800-2,700/tonne FD W Europe, with increases heard from €150-450/tonne from September levels, although the bulk of business is believed to have been conducted within a narrower range.

Crude MDI
Demand has been unusually strong for October in the crude methylene diphenyl diisocyanate (MDI) market, and supply has been limited or short.

“Demand is just relentless,” one rigid foam producer said, referring to activity in construction beating expectations in recent months.

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Crude or polymeric MDI (PMDI) contracts for October were assessed this week climbing €50/tonne at the lower end and €70/tonne at the upper end of the range, to €1,600-1,900/tonne FD W Europe.

October contract prices were heard between €1,500-2,000/tonne FD W Europe, with changes from September prices heard between rollovers and increases of €120/tonne.

The bulk of business is believed to have been transacted within a narrower range.

There were several unconfirmed reports this week of issues affecting supply from Covestro, which has three MDI production sites in Europe.

The production issues have led to some order cancellations among rigid foam suppliers, and high demand levels are seen continuing in November.

PURE MDI
Demand for pure or monomeric MDI (MMDI) has improved in Turkey and the Middle East, where shoe sole production has increased.

“You can increase the price easily in the Middle East and Turkey because there's basically no supply,” a Europe-based pure MDI producer said.

ICIS Editorial Chart goes here

October contracts were assessed this week climbing €50-100/tonne to €1,850-2,100/tonne FD W Europe.

Feedback on October contracts was heard in a wide range from €1,650-2,400/tonne FD W Europe, with changes from September ranging from rollovers to increases of €250/tonne. The bulk of business is believed to have been conducted within a narrower range.

POLYOLS
The Europe polyols market is tight following feedstock propylene oxide (PO) and ethylene oxide (EO) supply constraints, alongside strong downstream demand.

“Demand is much higher than our availability,” one Europe-based polyols producer said.

October conventional polyether polyols contracts were assessed this week with increases of €150/tonne at the lower end and €100/tonne at the upper end of the range, to €1,650-1,850/tonne.

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The upper end of the range is now at its highest level since January 2015.

Feedback on October contract settlements was heard in a wide range this month from €1,450-1,880/tonne FD (free delivered) NWE (northwest Europe) depending on grade, volume and location. Feedback on increases from September was also wide, ranging from €50/tonne at the low end up to €300/tonne at the high end. In both cases, the bulk of business is believed to have been carried out within a narrower range.

Supply is currently tight or short, and a force majeure on polyols from producer Dow remains in place. There have been unconfirmed reports of supply constraints from other producers including Repsol.

Demand for flexible foams is strong and has been supported by a boom in home improvement linked to coronavirus pandemic lockdowns. Demand for furnishing is expected to remain strong through to the end of the year.

Focus article by Fergus Jensen