MDI Market Storm! Supply Gap Exceeds 2 Million Tons, Price Surges 22%! Multiple Giants Suspend Production for Maintenance, Impact May Last Until 2025

Recently, in view of a number of MDI (diphenylmethane diisocyanate) production bases in Europe encountered force majeure factors (that is, unplanned shutdown) and industry leading companies have carried out centralized shutdown maintenance, resulting in a significant reduction in global MDI product production capacity, which led to tension between supply and demand in the MDI product market, and prices are facing upward pressure. According to industry analysts, the supply situation in the domestic market is grim, and it is expected that by September, the domestic aggregate MDI market will show an upward trend, and the average price is expected to climb from August. The recent series of events in the global MDI industry has made the market's expectations of rising prices of MDI products continue to increase, and industry experts generally believe that this phenomenon may have a profound impact on the Chinese MDI market.

Recently, a series of major events have occurred in the international chemical industry, which has had a profound impact on China's MDI market. In the first half of 2024, Saudi Basic Industries Corporation (SABIC) and ExxonMobil of the United States have announced the closure of some of their installations in Europe, with a cumulative ethylene capacity of nearly one million tons. Then, in April 2024, the US chemical giant BASF issued an official statement that due to force majeure factors, its production plant with an annual capacity of 400,000 tons was forced to stop production. In the same month, the United States Covestro company also issued a solemn statement, its annual production capacity of 330,000 tons of production equipment also due to force majeure factors to stop production. Entering May 2024, Dow also issued an official notice that its production plant with an annual capacity of 340,000 tons was halted due to force majeure factors, which further exacerbated the volatility of the MDI market.

On May 15, 2024, Japan's Marubeni Petrochemical Company announced the closure of its 525,000 tons per year Chiba cracking plant in Japan, with plans to restart in mid-July. In early June 2024, Japan's Mitsui Chemical Company announced that it would stop operation of its 455,000 tons per year naphtha feedstock Osaka cracking furnace in Osaka Prefecture, western Japan, for scheduled maintenance, which was originally scheduled to be completed by the end of July. However, on July 15, 2024, Idemitsu announced the closure of its Tokuyama cracking plant with an annual capacity of 623,000 tons due to a gas leak. On July 23, 2024, when Mitsui Chemical Company restarted the Osaka cracking furnace after completing repairs, it found a technical problem with the steam supply system, which caused the cracking furnace to not operate normally. On August 5, 2024, chemical company Huntsman announced force majeure on MDI production at its plant in Rozenburg, the Netherlands. Huntsman operates two MDI units at the site, with a total capacity of 470,000 tons/year. Due to force majeure on the supply of raw materials from a local partner in the Netherlands, Huntsman Netherlands Rozenburg is currently operating at below normal capacity. It is uncertain how long the force majeure will last. Recently, Japan's Mitsui Chemical Company announced that it will extend the shutdown time of its Osaka ethylene cracking furnace for another 2-3 months, and the 610,000 tons of ethylene plant will be shut down and the restart time is uncertain.

These events provide us with valuable reflections and lessons. In China, on July 9, Wanhua Chemical announced that Yantai Industrial Park MDI, TDI and other integrated devices to stop maintenance, involving MDI (1.1 million tons/year), TDI (300,000 tons/year) and other integrated devices and related supporting devices. On August 1, Chongqing BASF equipment began to stop production for maintenance, affecting the production capacity of 400,000 tons/year. Dong Caorui's MDI distillation unit, with a capacity of 80,000 tons/year, was shut down for maintenance on July 26. Overseas, Wanhua Chemical Hungary Borsted 400,000 tons/year MDI equipment, began to stop production on July 16 maintenance. According to an update on the BASF Group's website on August 21, the group has begun to share with customers information on the allocation volume and share the initial timeline for resumption of production, in response to concerns about how long the timeline can be resolved. Once the unit is restarted, production will follow staggered production sequences, according to the announcement.

Based on the current information, the estimates are as follows: The first production of incense raw materials. Some ingredients will not be produced earlier than October 2024 and the rest will not be produced earlier than the end of November 2024. This is followed by vitamin E, vitamin A and carotenoid products. Based on current assumptions, production of these products will not begin earlier than January 2025.

Due to the force majeure of a number of MDI production units, as well as the concentrated suspension of production and maintenance of the industry's leading enterprises, the global MDI product production capacity has been significantly reduced, and the price has also risen under the situation of short supply. Pure MDI quoted 19,200 yuan/ton, up 3,400 yuan/ton from the same period last year, an increase of 22%. Aggregate MDI quoted 17,871 yuan/ton, up 2700 yuan/ton from the same period last year, an increase of 18%. In addition, leading enterprises continue to stop production maintenance has also made the shrinking capacity worse. Wanhua Chemical issued Yantai Industrial Park MDI (1.1 million tons/year), TDI (300,000 tons/year) and other integrated devices parking maintenance; Chongqing BASF plant shutdown maintenance, affecting the production capacity of 400,000 tons/year; Dongcao Ruian has a production capacity of 80,000 tons/year of MDI rectification equipment, and Wanhua Chemical Hungary Baosd 400,000 tons/year MDI equipment is stopped for maintenance, of which the longest is 45 days. In other words, the global MDI supply may be significantly reduced by more than 2 million tons throughout August, and emergencies and maintenance outages have affected about 24% of global capacity.

As a result, in addition to the price increase of MDI, some manufacturers also stopped the price in time to cope with the current shortage of supply in the market, and traders are also more bullish. According to the company's plan, the shutdown maintenance cycle ranges from 14 days to 45 days, and most are expected to resume before the end of August this year. This means that global MDI supply for the whole of August could be significantly reduced by more than 2 million tonnes. It is estimated that the total capacity affected by shutdowns and maintenance accounts for about 15% of global capacity.