China’s Coal Crunch Hits Major Toluene Diisocyanate Production Unit, Price Shocks to Follow

The coal crisis in China continues to haunt the country’s chemical industry, with many production plants having to curtail or halt plant operations due to long power outages or raw material shortages, thereby affecting more than 25% of the output.

Following suit, China’s state-owned chemical enterprise controlled by China National Chemical Corporation, Cangzhou Dahua Group Co. Ltd., on October 11, announced a temporary suspension of its Toluene Diisocyanate facility located at the Juhai site. The company boasts an annual production capacity of 150 KTPA Toluene Diisocyanate at its Juhai branch.

The shutdown of the Juhai production site follows the extremely low coal inventories that are almost on the brink of extinction in China that has caused standstills in industrial steam production. The repercussion was observed in the form of disruption in the inflow of steam to Cangzhou Dahua from the domestic steam manufacturers and suppliers who are struggling to procure coal from all possible sources.

Toluene Diisocyanate is a carcinogenic organic compound typically produced from the nitration of toluene giving dinitrotoluene which is catalytically hydrogenated to form toluene diamine which is further dissolved in an inert solvent and treated with phosgene to yield crude Toluene Diisocyanate solution. Toluene Diisocyanate is largely used for producing polyurethane foams that have wide industrial uses in forming mattresses, rigid foam insulation panels in houses, flexible seats, and other automotive parts. In addition to polyurethanes, Toluene Diisocyanate is utilized in sectors like coatings, elastomers, adhesives and sealants.

As per ChemAnalyst, China’s economy is experiencing shockwaves due to disturbingly low coal inventories, which has driven a large portion of the petrochemical sector into dormancy. With the other parts of the world also facing the energy crisis, the situation in China is not expected to get under control soon. The companies going offline are not giving any indication of resuming soon. This is expected to lead to tight supplies followed by an inevitable price rise of Toluene Diisocyanate in the downstream market. It is worth noting that the Toluene Diisocyanate supply had gone weak recently in September when the company had closed its production plant for a 20-days turnaround. The exports of Toluene Diisocyanate will also be bearing the impact of low production in the country.