Asia TDI downtrend continues on sluggish demand

04 October 2018 05:00 Source:ICIS News

SINGAPORE (ICIS)--Asia’s toluene di-isocyanate (TDI) prices may remain on a downtrend in coming weeks, if regional demand fails to pick up soon.

Car seat. Toluene di-isocyanate (TDI) is mainly used for the production of polyurethane (PU) flexible foams used in upholstery, mattresses and automotive seats. (Photo by Oleksiy Maksymenko/imageBROKER/REX/Shutterstock)

 - Sellers cut offers in southeast Asia/India to stimulate sales

 - Buying interest thin amid holiday in key China market

 - Buyers unwilling to commit before China market re-opens

Although TDI demand usually firms in the third and fourth quarters on seasonal factor, such expectations have thus far fallen flat this year.

Buyers held back purchases on growing concerns on how their own downstream markets will be squeezed amid the ongoing US-China trade row.

The key China market is shut from 1-7 October for extended National Day holidays, leaving TDI sellers with no alternatives but to tap more heavily into other regional markets, like southeast Asia and India, for fresh deals and trades.

But TDI trades into southeast Asia fell sharply on 3 October, with deals closed at around $2,850/tonne CFR (cost and freight) southeast Asia. Discussions for TDI on a CIF (cost, insurance and freight) India basis also languished below the $2,950/tonne mark.

At the end of September, TDI trade closed at an average of $3,025/tonne on a delivered basis in southeast Asia and India, according to ICIS data.

The decreases came as TDI sellers moderated offers in a bid to stimulate buying. But “the effect seems limited”, a regional trader said.

Buyers’ response remained lukewarm, as most held back concrete procurement decision this week, preferring to wait for clearer pricing directions to emerge after China market re-opens on 8 October, market participants said.

China is a key outlet for Asian TDI output, but buying appetite there has been curtailed for sometime now, as the manufacturing sector in China goes through some rocky periods, amid growing export uncertainties stemming from the country’s trade war with the US.

Average CFR China TDI prices have slipped correspondingly to $2,925/tonne on 3 October from above $4,000/tonne in March, ICIS data shows.

Prospect of a quick recovery for TDI demand post-holiday seems dull, a regional trader said, judging from lacklustre economic performance indicators.

China’s official purchasing managers index (PMI) was at an eight-month low level in September, suggesting that the country's manufacturing sector is still struggling to ramp up in time for the usual year-end-export boom.

As long as Chinese TDI import prices stay weak, it will continue to weigh down on near-term TDI discussions in southeast Asia and India, market participants said.

Focus article by Ai Teng Lim

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By Ai Teng Lim