Chinese PMDI import prices to remain under pressure on weak demand

SINGAPORE (ICIS)–China’s polymeric methyl di-p-phenylene isocyanate (PMDI) import prices plummeted by more than $200/tonne within a week, to fresh two year-low levels, and the downtrend looks set to extend further, if downstream demand fails to pick up soon.

 – China import prices decline in parallel with fall of domestic price 

 – Environmental protection enforcement impacts production

 – US-China trade war keeps buyers cautious not to over-commit

On 29 August, PMDI settled at an average of $1,950/tonne CFR (cost and freight) China, 16% lower than when trade begun in August, ICIS data showed.

This is the first time since September 2016 that PMDI prices into China had breached below the $2,000/tonne CFR China mark.

The decline came on the back of a parallel fall in Chinese domestic prices.

According to ICIS data, PMDI values in China had steadily fell in last few weeks, closing at barely yuan (CNY) 18,000/tonne DEL (delivered) east China this week, compared to well above CNY 20,000/tonne when August trade started.

Prices have probably not hit bottom yet, market sources said, as sellers of domestic Chinese supplies are heard still contemplating the need to offer steeper discounts to boost sales.

Typically, demand for isocyanates like PMDI climbs during summer months amidst anticipated season surge in requirements from applications like construction and white goods manufacturing.

But this year, such a summer hike in demand has “yet to surface”, a China-based trader said.

In fact, downstream off-take in China has been sluggish, forcing some PMDI sellers to continually price lower in a bid to move some cargoes and relieve inventory pressures, the same trader said.

A key factor crimping PMDI demand is likely the ongoing and stringent enforcement of environmental protection rules in China, market players said.

Many downstream factories in the country are “either still shuttered, or operating at low rates”, a trader said, and understandably, this means consumption of raw materials including PMDI cannot ramp up.

Looming uncertainties in the international trade environment have further dampened buying appetite, as downstream end-users in China are cautious not to over-commit until they get more clarity on the extent of punitive tariffs that US and China may slap on each other in the ongoing trade war.

Neither of these two developments seem likely to blow over soon, which triggered concerns among many market players that the current muted demand conditions for PMDI may be longer-drawn than necessary, making it difficult for prices to recover in the near term.

Meanwhile, supply is regular, a producer said, as most plants in the region are operating normally.

Japan’s Tosoh Corp has plans to shut its 200,000 tonne/year plant in Nanyo for a 45-day maintenance beginning middle of September, but market sources said that any ensuing cuts in regional availabilities may still not boost prices, given that China does not typically consume much from this channel anyway.

Some market players remain hopeful that buying in China could improve in September, as end-users usually move to replenish or build stocks ahead of the week-long Golden Week holidays in early October.

If this scenario materialises, it will help mitigate downside pressures on PMDI prices in China.

($1 = CNY 6.83)

Focus article by Ai Teng Lim