New US MDI capacity may alter trade flows, supply-demand balances

Zachary Moore

16-Nov-2018

HOUSTON (ICIS)–Additional capacity for methyl di-p phenylene isocyanate (MDI) in the US could alter trade flows and supply-and-demand balances in the coming years.

Solid growth prospects for MDI – both globally and within North America – along with low-cost energy and feedstocks in North America have spurred a wave of new MDI capacity in the country.

BASF plans to double the capacity of its MDI plant in Geismar, Louisiana to 600,000 tonnes/year from 300,000 tonnes/year by 2020.

Covestro plans to build a new 500,000 tonnes/year MDI plant in Baytown, Texas, scheduled to come online by 2024. When it starts up, Covestro plans to close an existing 90,000 tonnes/year plant, bringing its total MDI capacity in North America to 740,000 tonnes/year.

On Friday, Wanhua Chemical announced that it selected Convent in St James Parish, Louisiana as the site for its new 400,000 tonnes/year MDI plant. Construction is expected to begin in 2019, and operations and is scheduled to begin in 2021.

These three expansions will add 1.1m tonnes/year of new MDI capacity by 2024.

According to ICIS data, total MDI capacity in the US in 2018 is 1.46m tonnes/year, The news plants are a 75% expansion in total North American capacity over the next six years.

Wanhua’s plans to build a new plant emerged in July 2017. Concerns regarding the plant surfaced in the wake of the US-China trade war, with the company seeking a tariff exemption on aniline imports from China.

ICIS anticipated an additional new world-scale plant in addition to BASF’s new plant by 2026, which Covestro’s new plant seemed to meet.

“We anticipate a compound annual growth rate (CAGR) of a little under 5% for MDI demand over the next five years in North America, after North American MDI demand posted an impressive CAGR of 7% from 2011 to 2017,” ICIS Consultant Rob Peacock said.

Peacock said that additional MDI supplies in the US could push average operating rates in North America close to 80% while keeping prices in the region under downward pressure.

According to ICIS projections, demand for MDI in North America would rise to fully absorb all new capacity by 2030.

“Up to 200,000 tonnes of imports could be displaced with new North American MDI capacity. However, we still see some room for Asian imports into the US West Coast, as the logistics cost of moving MDI from Asia to the US West Coast are competitive relative to the costs of shipping MDI to the West Coast from the US states of Texas and Louisiana, where all domestic MDI capacities are located,” Peacock said.

The US is likely to maintain its position as a net exporter of MDI, with most US exports destined for Canada, Mexico and South America.

MDI producers in the US are Huntsman, Covestro, BASF and Dow Chemical.

Focus article by Zachary Moore

Photo: Methyl di-p-phenylene isocyanate (MDI) is used in spray foams.
Photo source: Shutterstock

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