OUTLOOK ’18: US polyol demand set to rise with polyurethane demand growth

HOUSTON (ICIS)–US demand for polyols is likely to rise in 2018 along with healthy demand expected for polyurethane systems.

Polyols are combined with isocyanates to produce polyurethane foams, which are used in a wide variety of applications in the construction, automotive, appliance and home furnishing sectors.

Demand for downstream polyurethane systems is strong and is expected to see continued healthy growth in 2018. Polyurethane foams have excellent insulating properties and the move across many industries to adopt more energy-efficient technologies is leading to greater demand for polyurethanes.

Rebuilding efforts in Texas, Florida and Puerto Rico following an active Atlantic hurricane season may provide an extra boost to polyurethane demand in the coming year.

According to a survey on production and end use of polyurethanes by IAL Consultants, production of polyurethanes in the countries participating in the North American Free Trade Agreement (NAFTA) was up by 4.4% in 2016 when compared with the results of the most recent survey taken in 2014, causing production of polyurethanes in North America to rise to levels last seen prior to the 2008 recession.

While demand for polyols is expected to rise along with demand growth for polyurethanes, demand growth could be capped by supply constraints for polyurethane co-feedstocks methyl di-p phenylene isocyanate (MDI) and toluene di-isocyanate (TDI). Several polyol sellers confirmed that volumes were constrained in 2017 by isocyanate shortages and that buyers had delayed purchases owing to a lack of isocyanates, especially TDI.

Availability for polyols is comfortable and is expected to remain so in 2018. Polyol supply experienced only a single major disruption in 2017 stemming from the impact of Hurricane Harvey and even then most of the disruption was due to feedstock shortages and logistical bottlenecks.

Polyol production is well distributed throughout the US, whereas production of many petrochemical products is heavily concentrated in the US Gulf.

With supply expected to remain sufficient, the direction of pricing is likely to be set by movements in feedstock costs.  Propylene is the primary feedstock for polyether polyols and polyol pricing typically follows the direction of the propylene market with a lag of one to two months.

Diethylene glycol (DEG) and adipic acid are the primary feedstocks for polyester polyols and movements in these markets are likely to be the primary factor driving changes in polyester polyol pricing in 2018.

Major US polyol producers include DowDupont, BASF, Covestro, Shell, Stepan and COIM.