Isocyanates Still Strong Amid Covid Scare, Strong performance from Polyurethanes continues

Isocyanates market continue to stack strong performance and same has been observed in the 4^th quarter as well building on the previous quarter pattern. This remarkable performance came on the back of production losses globally and ferociously high demand from downstream polyurethane (PU) sector throughout the year.

Demand for PU has remained strong throughout the year as construction sector particularly house refurbishing and other allied sectors have kept un upward pressure on the volumes available in the market. Increasing trend of Work from Home (WFH) in 2021 meant employees leaned towards comfort at home resulting in rise in demand for bedding and soft furnishing at homes. Although, automotive sector has performed underwhelming all through the year, increased demand from construction sector has led to demand growth in polyurethanes and in turn spiked demand for isocyanates.

China, a pivotal exporter worldwide, has struggled to keep optimum production levels caused by multitude of regional factors. The impact of logistical issues and port congestion coupled with the limited availability of feedstock have induced additional cost support to the offered quotations for TDI in the Chinese domestic market. In addition, the robust trading practices at the Chinese spot market caught the market players off-guard and the tightened availability of freight vessels weighed over the smooth onboarding operations. As a ripple effect, the market movement strengthened the producer's will to raise the offered quotations for TDI in the Chinese domestic market. Therefore, FOB price discussions were assessed at USD 2470 per ton in November.

In the West, prices of MDI and TDI has increased remarkably owing to the tight supply of propylene oxide throughout the year. Production losses in US firstly, caused by winter storm and then hurricane Ida has resulted in lopsided supply-demand fundamentals, where demand has increased for PO, MDI and TDI, meanwhile supply fundamentals have deteriorated. In Europe, supply disruptions have been caused by unforeseen weather conditions which include floods in some regions while Rhine has observed low levels of water resulting in plant shutdowns and logistics problems and immensely hampering production levels. Lower production levels in Asia Pacific meant there was limited availability of imports to the West. Therefore, limited domestic supply and curtailed imports amid strong demand all have catapulted the prices of isocyanates to record levels.

In last few weeks, there has been emergence of another Covid variant, Omicron, which has sent shockwaves in the petrochemical market resulting in bearish market sentiment for various chemicals and petrochemicals. However, similar impacts have been absent on whole polyurethane chain beginning from propylene oxide. This has been caused by robust demand for the material from the critical end-use industries.