MDI Market Analysis and Forecast

Introduction: The Chinese MDI market continued sliding. The fundamentals were complicated. Players were confused about the current market. ECHEMI will analyze the detailed factors in the MDI market.

The Chinese MDI market continued moving down. Up to January 24, 2017, mainstream negotiation prices for MDI in East China and North China were in the range of RMB 24,200-25,300/mt in cash. Mainstream prices for MDI in South China were in the range of RMB 24,400-26,000/mt. Prices mentioned above are prices including VAT.  

Why the price spread between MDI from Wanhua and other producers was huge?

Mainstream negotiation ex-works prices for barreled M20S from BASF and 44V20 from Covestro in North China and East China were in the range of RMB 24,200-24,400/mt in cash. Mainstream negotiation ex-works prices for barreled PM200 from Wanhua were in the range of RMB 25,200-25,300/mt in cash in North China and East China. In South China, mainstream negotiation delivered prices for M20S and 44V20 were in the range of RMB 24,400-24,500/mt in cash, with those for PM200 being in the range of RMB 25,700-26,000/mt.   

The price spread reached above RMB 1,000/mt. There are two major reasons: First, Wanhua controls the supply amount and won’t increase the supply. Players thinks that Wanhua’s settlement prices will be above RMB 26,000/mt. Dealers hold firm offers on the limited goods and production cost pressure. Second, Covestro (Shanghai) saw inventory pressure. Sadara’ goods have been accepted by Chinese large-sized refrigerator producers. Covestro (Shanghai) reduced dealers’ prices, which weighed on the BASF’ resources.

How is the coming market? ECHEMI thinks that the coming market will continue to be weak.

Supply: The 400kt/a MDI unit (Phase 1) at Wanhua (Ningbo) have restarted. The 800kt/a MDI unit (Phase 2) is still shut. The supply in Covestro is increasing. On the whole, the overall supply will increase.

Demand: With the coming Spring Festival, the buying interest form downstream users is limited. The overall demand for MDI is tepid.

Traders’ Sentiments: Wanhua’ dealers hold firm offers on the tight supply and high production cost. Other dealers operate flexibly.

Forecast: At the end of January, Chinese MDI producers will publish the posted prices in February and supply plan. The supply in Covestro is ample and Wanhua sees tight supply. As for BASF, the supply is modest. The downstream demand is sluggish. ECHEMI predicts that the Chinese MDI market may be stable first and then move down in February.