SINGAPORE (ICIS)--Polymeric methyl di-p-phenylene isocyanate (PMDI) prices in Asia and the Middle East are expected to be weaker in 2018 after the first quarter as supply continues to improve following shortages in 2017.
Prices are likely to find support in early 2018 on the back of output cuts at some Asian plants while demand is expected to improve after the year-end lull.
BASF declared force majeure (FM) on its methyl di-p-phenylene isocyanate (MDI) production at its 400,000 tonne/year Chongqing plant on 12 December due to a shortage of natural gas from its syngas supplier.
Also, the world’s largest MDI producer – China’s Wanhua Chemical – had to shut its 400,000 tonne/year and 800,000 tonne/year units in in Ningbo, Zhejiang province, in December for regular maintenance.
On top of that, Kumho Mitsui Chemicals Inc (KMCI) 200,000 tonne/year plant had been running at a reduced rate of around 60-70% for most part of H2 2017 because of a shortage of raw material carbon monoxide (CO) from a local supplier.
KMCI may only start up its 100,000 tonne/year MDI expansion line in Q2 2018 as a result of the CO shortage.
In 2017, PMDI prices in Asia and the Middle East traded at all-time highs, with average PMDI prices in China hitting a peak of $4,050/tonne CFR (cost & freight) on 20 September before retreating to around $3,300/tonne levels in the final two months of the year, according to ICIS data.
Prices in Asia have been setting the pace for Middle Eastern prices and at times suppliers have re-directed cargoes to Asia instead of trying to secure buyers in the Middle East region. That in turn, resulted in Middle East prices having to keep up with the higher Asian prices.
From late-September to early-November, PMDI prices in the GCC (Gulf Cooperation Council) and East Mediterranean traded at record highs of $3,400-3,500/tonne CFR. Soon after, PMDI prices in Iran also hit record highs of $3,700-3,800/tonne CFR.
The alleviation of tight supply in November had resulted in prices correcting from their highs.
In the Middle East, buyers have been holding out for lower prices as many buyers were unwilling to commit to deals due to their inability to pass on the costs to their end-users.
In June 2017, Sadara Chemical Company announced it had started producing PMDI from its facility in Jubail, Saudi Arabia.
Sadara’s PMDI cargoes have largely been heading for markets in Asia and Europe but it was also believed to have started moving cargoes to customers in Saudi Arabia.
Sadara’s PMDI cargoes have been able to alleviate some of the supply shortages the market has been experiencing. If that continues in 2018, prices could face more downward pressure.
Sadara is a joint venture between US’s Dow Chemical and state energy firm Saudi Aramco. The facility has the capacity to produce 400,000 tonnes/year of PMDI, 400,000 tonnes/year of polyether polyols and 200,000 tonnes/year of toluene di-isocyanate (TDI).
Moreover, prices will likely be weighed further by additional capacity from Huntsman Polyurethanes Shanghai’s (HPS) 240,000 tonne/year expansion in Shanghai expected to come on stream in Q2 2018.
The start up of the unit has been delayed from its initial schedule of Q4 2017.
HPS has an existing 160,000 tonne/year MDI plant at the same site in Shanghai.
By Izham Ahmad and Matthew Chong