US isocyanate supply concerns easing following a tight 2017

HOUSTON (ICIS)–Isocyanate supply concerns in the US are said to be starting to ease following a period of persistent supply tightness which lasted throughout 2017 and through the first quarter of 2018.

Buyers say that pricing for both methyl di-p phenylene isocyanate (MDI) and toluene di-isocyanate (TDI) has stabilized recently, with some participants even predicting price relief later in the year for these two commodities.

Isocyanate buyers have been eagerly anticipating price relief after taking a series of consecutive price increases during 2017 as ongoing supply tightness allowed sellers to push through significant price increases. ICIS raised its assessments for US TDI by a cumulative amount of 75 cents/lb ($1,653/tonne) over the course of 2017, while US MDI prices were assessed higher by a cumulative amount of 53 cents/lb ($1,168/tonne) over the same time period.

Supply tightness remained in place throughout the first quarter, at least in North America, as a period of severe winter weather along the US Gulf Coast caused some additional shutdowns and forces majeure in the US. All US production of MDI and TDI is concentrated in the states of Texas and Louisiana.

BASF declared a force majeure on monomeric MDI (MMDI) from its 300,000 tonnes/year MDI plant in Geismar, Louisiana as well as a force majeure on TDI from its 160,000 tonnes/year TDI plant, also located in Geismar, in late Jauary. Dow Chemical also declared a force majeure in late January from its 340,000 tonnes/year MDI plant in Freeport, Texas.

However, these forces majeure have since been lifted while Asian availability for both products has eased, leading to downward pressure on MDI prices in both Asia and Europe. TDI availability has remained somewhat constrained as the market awaits the planned restart of BASF’s 300,000 tonnes/year TDI plant in Ludwigshafen, Germany.

The Ludwigshafen plant has been running at low rates for the past year while waiting for the installation of a new reactor. The plant was taken offline in January for the installation of a new reactor and a company spokesman said that the plant was on schedule to restart within a few weeks as of late April.

Buyers in the MDI market say that availability has eased as North American plants are heard to be running at healthy rates while Asian suppliers have raised their allocations to the North American market.

During 2017, many Asian suppliers had curtailed their allocations to North America as the US market offered less favourable netbacks than Asian markets while several Asian producers also experienced shutdowns. China’s environmental crackdown also acted to limit MDI availability as some Chinese plants had to shut down as environmental restrictions curbed their access to raw materials.

North American MDI pricing is said to be steady for now while buyers believe that they may be able to obtain some price relief by the end of the second quarter providing that the market does not experience any fresh supply disruptions.

The TDI market is also heard to be turning a corner on availability, although sellers are still seeking price increases of 10 cents/lb. These increases were initially announced for April but have been deferred until 1 June or as contracts allow.

Buyers say that they are no longer experiencing difficulties covering their TDI needs.  Pricing is expected to remain steady over the near term, although price relief may be seen later this year assuming that BASF successfully restarts its Ludwigshafen plant before the end of the second quarter.

Major US producers of isocyanates include BASF, Covestro, Dow Chemical and Huntsman.

Isocyanates are used to make spray polyurethane foam. Photo by Al Greenwood

Focus article by Zachary Moore