Global MDI and TDI tightness continues

London - Worldwide isocyanates markets have been bullish during the first quarter of 2017, although polyether polyol markets have been much less volatile.

During quarter one, MDI supply became tighter globally following a number of planned shutdowns.  MDI prices in China rose substantially especially in February and March, due to a spate of production outages.  BASF’s Chongqing MDI plant (400ktpa) is currently down due to problems with syngas supply.  Wanhua has delayed a planned shutdown at one of its Ningbo units due to the short supply situation in China.  The 800ktpa plant will go down in May for a maintenance turnaround, and it is currently running at reduced rates.

MDI producers in Europe announced sizeable price increases for March amounting to €200-250/tonne.  This was based on the tight market conditions, as well as a recent run-up in feedstock benzene contract prices.  Back in the fourth quarter 2016, European MDI prices spiked after Covestro’s declared force majeure on its MDI (and TDI) supply in Europe.  This had gone some way to restoring the MDI business to a more sustainable level for European producers, and left stocks in the market very low going into the first quarter. Supply was further impacted by a planned shutdown at a European MDI plant, which began in March.

In North America, MDI producers also announced price increases of 10c/lb for March contracts.  As well as the tight supply position, the large increases in benzene prices during the first quarter put considerable pressure on US production margins. In January and February, US benzene contract prices rose successively by 33-40c/gal and 59-65c/gal, although by March, the benzene market had cooled off and contracts dipped back down, albeit by just 7c/gal.

The firming trend in the global MDI market is likely to continue into April, and possibly further ahead if supply remains constricted.  The peak season for crude MDI demand into the construction sector has begun to ramp up, and this will also put continuing pressure on supply, particularly in Europe.