AFPM ’25: US polyurethane industry braces for cascade effect of tariffs

HOUSTON (ICIS)–US polyurethane prices for toluene diisocyanate (TDI), methylene diphenyl diisocyanate (MDI) and a variety of polyether and polyester polyols continue to see increase pressure as the market assesses the impacts of potential tariffs on imports from Canada and Mexico, heading into this year’s International Petrochemical Conference (IPC).

Because US domestic suppliers of polyurethane products expect a cascading inflationary effect of these tariffs, they are trying to price the cost of this inflation in new pricing offers for Q2. At the same time, these tariffs could hinder demand for polyurethane products in downstream industries such as automotive, construction, the comfort sector (furniture and bedding) and appliances.

25% TARIFFS RISK CAUSING DISRUPTION IN THE AUTOMOTIVE SECTOR
The ongoing worldwide tariff conflict heightens the chances of the automobile sector experiencing a prolonged disruption phase. This could imply a halt in the production of several car models, increased prices for new vehicles, and production delays due to hurdles in product development for the subsequent years, experts say. Automotive seating consumes large volumes of TDI and flexible polyether polyols.

Some analysts approximate that nearly one-third of North America’s vehicle production could face reductions as a response to the 25% tariffs on Mexico and Canada imposed by US President Donald Trump. These cuts would be part of the automakers attempts to balance the escalated costs, and simultaneously, consumers might procrastinate their new car and truck purchases.

Flavio Volpe, the President of the Automotive Parts Manufacturers’ Association (APMA), representing Canada’s OEM suppliers within the global auto industry, has shared that Canadian car parts suppliers have funneled more than $10 billion into parts facilities situated across 26 US states. These plants employ up to 48,000 US workers, equating to the workforce of roughly 5-10 large car and truck factories. Focusing on Michigan, it alone houses 55 Canadian parts factories employing 17,000 US workers.

TARIFFS MIGHT HINDER CONSTRUCTION SECTOR RECOVERY
The latest US housing starts numbers brought some hope for a recovery of the construction sector, which consumes a large amount of MDI and rigid polyols. Housing is a key end-use market for chemistry in the form of paints, wire insulation, house-wrap, sealants, roofing materials, resilient flooring, vinyl siding and related products. New housing also generates sales of appliances, furniture, carpet, fixtures and window treatments. In total, each start engenders on average over $13,000 worth of chemistry.

After plunging 9.8% month on month in January amid harsh winter weather, US housing starts rebounded 11.2% in February to an adjusted annual rate of 1.501 million, according to US Census Bureau data. February’s increase was led by an 11.4% gain in the single-family segment, noted Kevin Swift, ICIS senior economist for Global Chemicals. This segment is more sensitive to interest rates and housing costs that affect affordability. It is also more plastics intensive than the multifamily segment.

DEMAND FROM THE COMFORT SECTOR REMAINS WEAK
Poor demand continues to plague the comfort sector (furniture and bedding), with the latest sales on President’s Day not showing the traditional consumer interest the industry expected. The comfort sector consumes the largest volumes of TDI and flexible polyether polyols. There is hope that demand might recover in the second half of the year. Labor Day is traditionally the strongest sales day of the year for furniture and bedding items.

However, the latest consumer sentiment data does not bode well for expectations on consumer expenditures, which make up 70% of the US GDP. US consumer sentiment fell nearly 11% month on month in March amid ongoing economic policy and tariff uncertainties and inflation fears. The Michigan “Index of Consumer Sentiment” fell to 57.9 points in March, from 64.7 in February, according to preliminary results of the University of Michigan’s monthly consumer survey. Sentiment has now fallen for three consecutive months and is down 22% from December 2024.

FLAME RETARDANTS FACE RISK OF SUBSTANTIAL INCREASES
Expectations of further tariff increases are also feeding concerns about the rise of cost of flame retardants used in various polyurethane foams in the US. Case in point is Tris (chloropropyl) phosphate (commonly abbreviated TCPP), a chlorinated organophosphate flame retardant commonly added to polyurethane foams. TCPP is currently imported from China, often in blended form, but it can also be purchased as a sole product. Its cost in the US is currently above $2/lb and rising, although it’s still available in Canada for 58 cents/lb.

The prospect for further increases on imported products is having market participants scrambling to find TCPP alternatives that are economically viable. According to sources, some alternatives currently under consideration are Triethyl Phosphate (TEP), a halogen free flame retardant, and Tris(1,3-dichloro-2-propyl) phosphate (also known as chlorinated Tris, TDCP, TDCPP or Fyrol FR-2). There are other flame retardants available as well, but the key is to be able to find a solution that is economically viable compared to the cost of TCPP. Compounding the problem, last December China limited the sales of flame-retardant precursor antimony for exports, since antimony is also a dual-use product that can end up in military applications. Since 2020, antimony prices have increased over 234%, according to data from the Institute for Rare Earths and Metals.

ANTICIPATION OF TARIFFS INFLATIONARY EFFECT DRIVES SUPPLIERS TO OFFER HIGHER PRICES
Current negotiations for April and Q2 polyurethane pricing are wrapping up amid continued efforts by suppliers to increase prices. Especially in the flexible polyol segment, domestic suppliers are mentioning “margin improvement” and “inflation adjustment” needs as the main rationale for these price increases, which in some cases have come on top of prior increases announced in February for March. Foamers are fighting these increases, which have been offered for MDI and TDI as well.

Fundamentals do not seem to support these Q2 increase efforts. To begin with, downstream demand is not recovering any time soon. Second, there is plenty of product in the market despite some minor turnarounds in effect for MDI and TDI between mid-March and mid-Aril. Third, feedstock costs are not justifying price increases, either. All main polyurethane feedstocks such as propylene, benzene, toluene, ethylene glycol and 1,4 butanediol (BDO) are moving on downtrend trajectories.

Rather than being an adjustment to market dynamics, these increase pressures find their rationale in inflationary expectations of these tariffs, which polyurethane suppliers seem to be taking for granted.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 23-25 March in San Antonio, Texas.

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Focus article by Umberto Torresan

(Thumbnail shows polyurethane foam. Image by Shutterstock.)