Quarterly Update on Global on Methylene Diphenyl Diisocyanate (MDI) Market
For the Quarter Ending June 2021
On the back of firm offtakes and unstable supply, price hike for MDI was induced in the market of USA during this quarter. Demand for MDI remained effectively firm from plasticizers, insulator, and housing sector in USA. Therefore, after gaining upward momentum in early May, price of MDI reached USD 2850/MT by the end of June in USA. In addition, soaring freight cost also intensified the prices of MDI in USA during this timeframe, supported by lower inventory level after winter devastation in the country. Thus, prices rose consistently throughout the quarter, which hovered around USD 2825/MT for polymeric grade during final week of June in USA.
MDI demand in Asia varied with country over country, during this quarter, as demand pattern was different for major economies like India and China. In China, export demand for polymeric MDI remained high during the month of May, while the month over month growth of around 35.7% in exports was observed. Meanwhile, the demand from Indian market dented in May and June, as under the pandemic demand vanished from the downstream polyurethane segment. Under the movement restrictions in the country, Indian consumers were focusing on the essentials rather than opting for furniture related goods. Therefore, prices of MDI were assessed at USD 3360/MT in China and USD 3694/MT in India during the month of June.
Demand for MDI remained stable to firm during this quarter, supported by inadequate availability of feedstock chemicals in the region. Scarcity of raw materials increased the prices of MDI European market during this quarter, while demand fundamentals remained firm from downstream polyurethane to keep up the overall market sentiments across the region. In addition, major producers like Covestro operated on lower capacity, where producers diverted cargoes to USA to cater their domestic need.
For the Quarter Ending March 2021
North America’s PEG production efficiency was reduced to its lowest level during Q1 2021 due to rare climate calamity caused across the region. Extreme shortage of MDI and TDI was observed around the Texas, due to several plant shutdowns. Major MDI manufacturers were unable to run their plant operations under the extreme cold snap and hence had to announce force majeures on their plants across the gulf. Covestro announced force majeure at its 330 KTPA MDI unit in Texas. Several other plants in Texas, Louisiana, Mississippi, and Florida were down due to the weather conditions. Due to acute material shortage, major manufacturer like BASF raised their MDI prices by 224.7 USD/MT for pure MDI, in February 2021 across the region.
The Asian market also experienced the impact of global MDI shortage and faced price rise in major upstream products. The global shortage and insufficient domestic production of upstream products like formaldehyde led the prices of MDI to rise in the Asian markets, like in India where prices of MDI rose by 4.41% within the quarter and settled at USD 3771.91/MT during March. In addition, Chinese lunar holidays led to curtailed production at facilities across the countries, that reduced the inventory levels of major producers of the country and contributed to creating the regional shortage of MDI.
European countries witnessed tight supply for MDI amidst strong demand from the downstream polyurethane sectors. Majorly, the demand was rising from the construction sector, which was taking support from the government funding for sectoral growth. Amid strong demand, availability remained low due to reduced imports from the US gulf and insufficient production activity across Europe, which prompted double-digit price increases. During March however, prices lost momentum, as industrial activities across US started to resume to its original pace.
For the Quarter Ending December 2020
In October 2020, world’s largest MDI manufacturing company Wanhua Chemicals established its new coal-based methanol plant with 600 KTPA capacity in China which would be used to produce MDI and other related products. During November 2020, tropical storm in the US Gulf Coast interrupted the production of feedstock as various manufacturers were compelled to implement a plant turnaround under government norms. This affected the supply of the product across the globe leading to a considerable rise in its prices in major Asian economies like China and India. Towards the end of Q4, prices returned to normalcy as several production units came onstream after a prolonged turnaround. In India, massive investment plans rolled out by a chemical giant across the downstream polyurethane segments are likely to improve the regional MDI demand in the upcoming quarters.
Sentiments remained uplifted after BASF Corporation announced expansion of its MDI plant from 300 KTPA to around 600KTPA in Louisiana. Later in the quarter, the company revealed the completion of the first phase of this mega-plant expansion. US faced huge shortage of upstream Methanol from across the region following the disruption caused by the seasonal hurricanes in Q2, it eventually forced companies to increase their Methanol imports by 79% in November, which laid a direct influence on the prices of its derivatives like MDI. In addition, global surge in the prices of feedstock Formaldehyde triggered a direct impact on the prices of MDI towards the quarter ending December 2020.
Demand for MDI remained feeble in Spain during last quarter of 2020 due to decline in demand from the automobile sector, one of the key consuming sectors of MDI. As per the latest statistics, automobile sector of Spain contracted by around 19% in November 2020. In order to save it from further losses, UK and many European countries rolled out several global level schemes. Manufacturers raised their outputs backed by consistent efforts of the government amid anticipations of the automotive sector’s strong revival in the upcoming quarter that may improve the regional MDI demand.