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Escalation in European MDI prices amid firm demand and affliction in production rates
Escalation in European MDI prices amid firm demand and affliction in production rates

Escalation in European MDI prices amid firm demand and affliction in production rates

  • 05-Apr-2024 2:51 PM
  • Journalist: Peter Schmidt

The Methylene Diphenyl Diisocyanate (MDI) price trend continued to showcase bullish movement in Germany during March 2024. One significant factor affecting the production costs of MDI is the surge in feedstock Benzene prices amid the volatility in Brent crude oil prices resulting from production cuts by OPEC+ and the moderate availability of US stocks in the international market. Such fluctuations in crude oil prices often ripple through the petrochemical supply chain, impacting the prices of intermediate products like Benzene and Aniline. Additionally, the decline in skilled foreign labor due to rising racial tensions in the country has likely impacted operating rates at manufacturing units. A shortage of skilled labor led to disruptions in production schedules, potentially reducing output and increasing costs.

Despite these challenges, demand for MDI remained consistent from buyers. As per the sources, the new orders improved in the European region in March 2024 compared to the previous month. However, the Eurozone's Manufacturing Purchasing Manager's Index declined again in March 2024 and remained below 50, indicating a further slowdown in manufacturing sector activities. The tight availability of MDI supplies further supported prices, as buyers may have been willing to pay higher prices to secure the necessary quantities of MDI for future purposes.

Last month, in February 2024, the availability of MDI supplies was limited due to the tight availability of feedstock Benzene, and prices witnessed an increase of 4.5%. The production rates of feedstock Benzene faced affliction due to an escalation in upstream Brent crude Oil prices. At that time, the availability of Crude Oil stocks was low in the global market due to production cuts by OPEC+ and rising anticipations of further Oil production cuts by OPEC+ after the cease-fire in the Israel-Hamas War. Moreover, the European energy industry was at odds over energy security because of the US LNG export pause. It raised the variable costs of production.

According to ChemAnalyst data sources, the MDI Polymeric Grade FD Hamburg quotations in Germany witnessed USD 2417/MT at the end of March 2024.

As per the estimation, the MDI prices will escalate again at the beginning of the second quarter of 2024. The key reason is the limited availability of MDI key feedstock Benzene supplies in the European market due to firm cost support from upstream Crude Oil due to volatility in the Crude Oil market. The announced Crude Oil production cuts by major producers in the Middle East region and declining demand with increasing temperatures in the Northern Hemisphere impacting the upstream Crude Oil market. Meanwhile, the demand for MDI will likely remain moderate to high due to the anticipated increase in demand for Polyurethane products in the manufacturing and construction sectors. Usually, the manufacturing and construction activities remain firm during the second and third quarters of the year.

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