The Story Behind the Boom-and-Bust TDI Market

As the major raw material of polyurethane foam, polyurethane elastomer, coatings, adhesive, etc., TDI market saw ups and downs in the past two years. Many people may not know the real reasons. Today, ECHEMI will give you a real insight into the TDI market.

Based on the trends in the past two years, the TDI prices can be divided into four stages.

1). 2010-Apr 2016

From 2010, the self-support ratio of Chinese TDI was high. But the export volume was extremely low. With the production increasing, Chinese TDI producers operated in a loss. In 2016, the self-support ratio reached to 120%. The surplus production couldn’t be consumed if the export market continued to be tepid. However, the export volume increased obviously in 2016. Meanwhile, producers and traders found that the export was not difficult. The inventory in the Chinese market started to decline. From March 2016, all TDI producers started to see profits rather than loss. The price was around RMB 12,000/mt or, which was equivalent to the production cost. The TDI industry entered the Spring.

2). Apr-Dec 2016

The TDI market entered the crazy time. During this time, the TDI prices were irrelevant with the raw materials. The monopoly power appeared in the market. There are 16 big TDI producers, and 6 are in China. Except BASF (China) and Covestro (China), only four big producers in China. These four Chinese TDI producers could operate the market when their prices were lower than those from BASF. TDI prices reached RMB 55,000/mt in October 2016 with the gross profit at RMB 43,000/mt. Shares of Cangzhou Dahua jumped. However, the prices in November and December slumped on the coming off-season. In December 2016, the TDI price declined to RMB 27,000/mt. TDI export prices were always lower than the prices in the domestic market.  

3). H1, 2017

In early 2017, TDI market rebounded. Units in BASF, Hanwha, Cangzhou Dahua and Gansu Yinguang Chemical would undergo maintenance. In February, the posted prices from BASF jumped to RMB 36,000/mt. Other producers followed the uptrend. When players showed bullish sentiments, the TDI market went down again. At this time, the export market was normal.

4). H2, 2017

In June and July 2017, TDI producers tended to raise the prices. First, the increase was limited at $200-300/mt. In July, as the export volume remained high and some units were expected to undergo maintenance. The inventory was not ample. TDI prices increased to RMB 27,000/mt. In October, BASF (Germany) recalled some TDI that may include cancer-causing toxins and the 150kt/a unit at Hanwha would undergo maintenance. TDI prices jumped to RMB 42,000/mt in two weeks. Considering the high prices of TDI, some sponge producers shut down their units. In December, the TDI prices declined to RMB 33,000/mt and then remained largely stable as TDI producers controlled the inventory.   

On the whole, ECHEMI thinks that producers can still export goods to the global market. Though there seems monopoly in the Chinese TDI market, two preconditions exits in the market: posted prices fro BASF and the inventory in the global market. If the operating rate exceeds 70%, downstream users cannot consume all the TDI. So, the export window will open when the TDI prices decline to a certain level.