The TDI Market Fluctuated Sensitively Unstable Inventory

> Introduction

From H2, 2017, the TDI price experienced wide fluctuations frequently, especially in Q4, 2017. According to ECHEMI, in H2, 2017, the change rate of TDI reached up to 88.2%. The lowest price appeared in early July. The price of TDI produced by BASF was RMB 22,450/mt in early July. The highest price of TDI from BASF was RMB 42,250/mt in August and late October respectively. After August, the TDI prices maintained in the range of RMB 33,500-42,250/mt. The fluctuation range was only RMB 8,750/mt, and the change rate was only 26%.

> TDI Market 

From August to December, 2017, the TDI market experienced ups and downs for three times. Although the negotiation price of TDI decreased, the overall market trend was moderate. The inventory of TDI was low in H2, 2017, which led the TDI market lack reasonable remission. As a result, the TDI price became sensitive and fluctuated frequently.

After August, the inventory was often out of stock in TDI factories. From the supply side, during the low-priced period, the downstream users showed interest in purchasing, so TDI factories were easy to oversell. Furthermore, as the TDI factories operated for the previous contracts, the inventory was out of stock.

From the downstream demand side, the TDI price was high, which caused the high production cost. So, downstream users adjusted purchase plan. Most downstream users operated flexibly, and few users chose to stock goods during H2, 2017. Furthermore, influenced by the safety production work, the inventory of raw material decreased in the downstream factories. From the traders’ side, as the TDI price was on a high level in H2, 2017, the financing cost was high. Also, as the supply of TDI decreased in the spot market, majority of traders held low inventory and operated flexibly. In general, the TDI market lacked the remission of inventory in spot market.

The inventory was low among the TDI producers, downstream users and traders, which caused the supply-demand of TDI to be unbalanced. The annual output of TDI in 2017 was down nearly 6,000kt from 2016. However, the overall demand for TDI did not decrease obviously. Influenced by the environment protection supervision, some small-sized factories were eliminated. However, as part of demand from eliminated factories merged into the wide-scaled companies, the overall demand did not decrease clearly. As a result, the inventory was low in the TDI market. Without the reasonable inventory, the prices were hard to be adjusted. So, the TDI price fluctuated in a narrow range frequently.

Supported by the low inventory, the TDI price was hard to go down, which was RMB 33,000/mt. Then, the TDI price increased to RMB 40,000/mt. However, the rigid demand in downstream market decreased because of the high production cost. The Chinese TDI market continued running upwards. Although the TDI prices increased, the downstream demand was still weak.

> Forecast

According to ECHEMI, with the Spring Festival coming, the small and medium-sized companies in downstream market will avoid to operate on a high production cost. Downstream players will show weak interest in stocking goods and the store quantity will be lower from previous years. From the TDI factories side, although the TDI will be cumulative in factories during the Spring Festival, players will be able to control the TDI inventory. It is predicted that the Chinese TDI market will be range-bound before the Spring Festival. Players should pay attention to the downstream demand and TDI inventory after the Spring Festival.