OUTLOOK ’19: US isocyanate facing downward pressure on lengthening supply

Zachary Moore

04-Jan-2019

HOUSTON (ICIS)–Dynamics in the US and global isocyanate markets have changed drastically over the past year, with the persistent supply tightness that faced the markets at the beginning of 2018 giving way to ample supply heading into the start of 2019.

Supply for both toluene di-isocyanate (TDI) and polymeric methyl di-p phenylene isocyanate (PMDI) is expected to remain sufficient throughout the first half of 2019, with tightness in TDI expected to linger for the full year.

Monomeric MDI (MMDI) supply has been tight throughout 2018 on healthy growth in demand for this product as well as lack of new capacity. Supply is expected to remain constrained through the early months of 2019.

TDI supplies remained tight through the first half of 2018 but the second half of the year saw a shift from a tight market to an oversupplied market. BASF resumed full production at its 300,000 tonnes/year TDI plant in Ludwigshafen, Germany, in the summer of 2018, while Wanhua started up a new 300,000 tonnes/year TDI plant in Yantai, China, towards the end of the year.

These two plants account for more than 15% of global TDI capacity.

These capacity additions along with some demand destruction following the significant run-up in prices in 2017 has resulted in significant declines in TDI prices during the second half of 2018, with prices expected to remain under downward pressure in the early months of 2019.

North American TDI supply has been long through the second half of the year and no major change is anticipated in supply and demand balances in 2019. Some recent plant issues in Europe may help stabilise TDI availability at least through the early months of 2019.

PMDI supply is also anticipated to remain sufficient at least through the early months of 2019.

Asian exporters have maintained elevated allocations to North America as demand and pricing for PMDI have been more favourable in North America than in Asia for almost all of 2018 and this dynamic is expected to remain in place in 2019.

Trade tensions between the US and China may limit imported MDI supplies as the tariff on Chinese MDI is set to rise from 10% to 25% in January unless the US and China can successfully negotiate a new trade deal.

As China is by far the largest exporter of MDI to the US, any disruption to Chinese imports may alter supply and demand balances in North America.

MMDI supply has improved but will remain constrained at least in the early months of 2019.

MMDI demand is highly seasonal and typically enters a slow season during the winter months owing to the seasonal slowdown in the construction sector during the winter months in the northern hemisphere.

Globally, MDI demand is growing at a fast rate than TDI demand, suggesting that the MDI market may see a return to balanced to tight conditions before the TDI market. Some North American participants anticipate that PMDI supplies may begin to tighten again later in 2019 in line with increasing consumption.

Focus article by Zachary Moore

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