Earthquake and Tsunami in Japan and South Korea Affect the Polyurethane Industry Chain, NPG/TPM/TDI/MDI Supply may Change

On January 1, 2024, a strong earthquake of magnitude 7.6 occurred near the Noto Peninsula in Ishikawa Prefecture, Japan. After the earthquake, there were constant reports of residents being injured in Ishikawa Prefecture and the surrounding Niigata, Fukui, Toyama, and Gifu prefectures. The Japan Meteorological Agency stated that since January 1, 2024 local time, 155 earthquakes have occurred in Japan, including two strong earthquakes of magnitude 6 or above, with the highest magnitude reaching 7.6.

As of the afternoon of January 2, 2024, the Noto Peninsula earthquake had killed at least 48 people and injured many others. Japanese Prime Minister Fumio Kishida said very large losses have been confirmed so far, including multiple casualties, building collapses and fires. After the strong earthquake, power supply and water supply were interrupted in many places in Japan. As of the early morning of the 2nd, power supply to about 33,000 households in Ishikawa Prefecture had not yet been restored. The Japan Meteorological Agency said on the 2nd that there may be another earthquake with a magnitude of 7 or above in the next week, especially in the next two or three days.

In South Korea, Yonhap News Agency reported on the 2nd that Unit 1 of the Shin-Hanul Nuclear Power Plant located near the east coast of South Korea unexpectedly shut down that day, causing the operation rate of the nuclear power plant to drop to 40%. The cause of the shutdown is under investigation. The Korea Meteorological Administration said on the 2nd that the tsunami caused by the earthquake in Japan's Noto Peninsula reached the east coast of South Korea, with a maximum height of 85 centimeters.

Japan and South Korea are global leaders and major suppliers in various fields of downstream petroleum refining and fine chemicals. Infrastructure damage caused by earthquakes and tsunamis will cause related companies to temporarily suspend production. The earthquake and tsunami in Japan and South Korea are expected to have an impact on polyurethane-related companies such as Mitsui Chemicals, Tosoh, Mitsubishi, and Sumitomo Chemical, and their products include NPG, TPM, TDI, MDI, etc. According to statistics from the ibuychem, the current TDI production capacity in Japan and South Korea is 505,000 tons, and the MDI production capacity is 1.13 million tons. The main production companies are Mitsui, BASF, Covestro, Tosoh, Hanwha, etc.

According to current understanding, TDI, MDI and other installations in Japan and South Korea are mainly located in non-seismic areas. It is understood that they have not been affected by the earthquake yet, but the subsequent problem is the power problem. If the power cannot be restored in the short term, it will affect the normal production progress of the factory, thus affecting the supply and demand issues in the polyurethane market.

From the perspective of the Chinese market, the prices of TDI and MDI products have not been affected for the time being. In the new year, the listed prices of major manufacturers will remain basically unchanged month-on-month. However, this month, because the Ningbo maintenance equipment and some equipment in Chongqing and Shanghai factories are still shut down for maintenance, the overall supply of MDI is relatively limited, and the Shanghai Lianheng factory has a maintenance plan, and the supply of the two distillation plants has shrunk. The current aggregate MDI Wanhua cargo is 15,400 yuan/ton, and the Shanghai cargo is 15,200 yuan/ton.