BASF TDI plant output halt could stem GCC price decline

SINGAPORE (ICIS)–A production halt at BASF’s flagship toluene di-isocyanate (TDI) plant in Ludwigshafen, Germany, could halt the downtrend in prices in the Middle East, but a sharp recovery may still not materialize yet.

Khor Fakkport Dubai in the UAE (Photo by Deedee Degelia Brent Winebrenner Degelia/Mood Board/REX/Shutterstock)

The TDI market was roiled this week by news that German major BASF had stopped production at its Ludwigshafen plant after Rhine river levels reached an “all-time low” causing difficulties in transporting raw materials.

Water levels on the Rhine have reached an “all-time low”, the company said, after months of transportation difficulties along the key chemicals logistics artery.

According to market sources, soon after the BASF announcement, offers for European-origin TDI jumped by $100/tonne to buyers in the GCC. But the move was not followed by other major TDI suppliers in Asia which mostly kept their offer levels on hold and waited for a clearer indication of the full market impact.

In the Gulf Cooperation Council (GCC) and the rest of the Middle East, spot import prices in the week ended 29 November declined to $2,050-2,150/tonne CFR (cost & freight) GCC, down $50/tonne in the previous week.

These marked the lowest prices for TDI since April 2016 and were in stark contrast to the highs of March 2018, when prices were at $4,650/tonne CFR GCC.

But prices could be close to bottoming out after the BASF announcement, especially with Germany’s Covestro also having informed its customers the Rhine water levels could affect its polyurethane (PU) business. Covestro subsequently reduced operating rates, but did not disclose which facilities were affected.

“I won’t be surprised if Covestro also follows suit as their plants are around the same location too,” said a source in Europe.

“This could be a shock for the market but consumption is still much slower than expected. We do not see any shortage yet.”

TDI prices in the GCC have been on a downtrend since the end of the first quarter, a move that was believed to have been accelerated when BASF announced the restart of that same  Ludwigshafen plant in July.

Asian market sources said although some of their customers were worried that the BASF’s production halt could signal the start of a recovery in TDI prices, there was still no sign of any rush to secure TDI orders just yet.

“Prices will still not go up further because the demand is still very soft,” said one Asian seller. “But for me I just stopped lowering my prices.”

Middle East sources said that while they were monitoring developments and were not seeing any indications of any supply shortages just yet.

There were some concerns in the Middle East market that a recent rebound in Chinese domestic TDI prices could spread as some rode on the BASF news to justify price hikes for Chinese buyers.

This could yet be mitigated if Chinese seller Wanhua Chemical reaches on-spec production at its new 300,000 tonne/year Yantai TDI plant by the end of the year, as expected.

Much would hinge also on how long the production halt at BASF’s Ludwigshafen plant would last, sources added. BASF has simply said restart of production is contingent on improvements in Rhine water levels.

“I think [TDI] prices will not go up immediately but maybe it will stabilize first. Buyers are still not in a hurry to buy,” said another Asian seller.

Focus article by Izham Ahmad