Quarterly Update on Global Polyurethane (PU) Resin Market
For the Quarter Ending June 2021
Polyurethane prices in USA climbed up during this quarter, due to limited availability of feedstock MDI across the region. USA imported feedstock MDI from Europe due to domestic supply tightness amid stable to firm demand from domestic market. Downstream furniture manufacturers in USA revealed that, they had to stop their production activities due to low domestic availability of PU during this quarter. In addition, due to the devastation in US Gulf coast during February, inventory level of upstream remained insufficient to satisfy the overall requirement, while manufacturers ensured releasing the backlog order at the same time. Therefore, under firm demand fundamentals and limited availability, prices of Polyurethane increased effectively in USA during Q2 2021.
Overall demand for Polyurethane kept fluctuating in Asia, due to unstable demand from regional market. In China, manufacturers revealed that they experienced huge export demand for feedstock MDI from North America followed by Europe and Asia, which drove the overall market dynamics. In the meantime, regional market fundamentals for PU remained positive due to stable offtakes. However, the demand from Indian market remained dull due to sudden surge in Covid cases in the country, while under movement restrictions, people remained more inclined towards essentials. Therefore, under the pandemic mayhem demand for PU from downstream furniture and automotive sectors remained bearish throughout the quarter in India.
Europe experienced a huge price hike for Polyurethane during Q2 2021, due to regional scarcity of raw material. Curtailed supply activities in the domestic market of USA increased the export demand for feedstock MDI and Polyurethane from Europe during this timeframe. While ensuring sufficient offloads to USA, European PU buyers experienced an effective shortage for feedstock MDI and PU in their respective countries. Thus, regional prices of Polyurethane increased effectively under the market scenarios.
For the Quarter Ending March 2021
The global supply of Polyurethane was already tight during Q1 2021 and a rare winter storm across US gulf region worsened this situation. Hit by the storm, several plants including refineries across the region faced forced shut down that created the severe shortage of the feedstocks MDI and TDI. Although demand from the domestic market was moderate, export demand from several Asian countries was exceptionally high. Extremely low temperature forced Covestro to announce force majeure at its MDI and TDI plants across the US gulf. Similarly, several other plants producing MDI and TDI in Texas, Louisiana, Mississippi, and Florida were impacted by this rare weather condition.
While there was consistent increment in the overall demand of Polyurethanes in Asia, the supply remained strictly low across the region. The global price of PU was increasing rapidly, due to severe product shortage and dented supply chains due to a sequence of events across the globe. In addition, lower industrial production in several Asian countries like China and South Korea, also reduced the domestic output of PU in the country. Meanwhile, during Chinese Lunar New Year holidays, China’s domestic output reduced that pressured inventories levels of several suppliers, thereby driving PU offers to exceptionally high in the beginning of March. Surge in the prices of feedstock MDI and TDI further supported the uptrend.
The overall demand for PU in Europe remained low during Q1 2021 due to slow production activity in the domestic automotive sector. Overall prices of PU remained extremely high due to high demand outpacing the production levels. Hike in the price was also affected by the freezing weather condition across Europe which halted the supply of feedstock MDI and TDI across the region. The European Automobile Manufacturers Association has anticipated around 10% growth in the regional Automotive sector in 2021 which will improve the demand for PU across the region in forthcoming quarters.
For the Quarter Ending December 2020
Due to consistent increment in demand of Methanol to produce MDI and PU, Wanhua, the world’s largest upstream MDI manufacturing unit established its new methanol plant of 600,000 tons/year capacity during October 2020 in China. This plant is aimed at increasing the supply of upstream MDI for the production of PU resin to cater to soaring product demand. Shortage of feedstock triggered a sharp surge in PU prices across several countries including India. Price of both PU adhesives and Sealants witnessed a sharp increase in December buoyed by growing demand prospects and escalating raw materials.
During October 2020, BASF started its MDI manufacturing plant expansion program from 300,000 tons/year to 600,000 tons/year in Louisiana. This plant will increase the production of MDI to ensure continuous availability of feedstock for PU manufacturing in the North America region. During Q4 2020, USA suffered with the shortage of raw material buoyed by congestion at ports and lack of shipping containers which forced companies to await the delayed shipments. Lack of product availability triggered abrupt increase in the price of MDI and eventually of Polyurethane Resins.
The second wave of COVID-19 infections impacted the European automobile sector significantly and led to downfall of many other linked sectors. Polyurethane demand was low, due fall in demand from the automobile sector. As per data, automobile sector of Spain was contracted by around 17% during November 2020. With players struggling to protect their margins, production of MDI and PU was way below the anticipated levels, leading to increase in the price of PU resin in the key European countries.