China's aggregate MDI supply and demand status and prospects

Polymeric MDI (diphenylmethane diisocyanate) is the raw material for the production of rigid polyurethane foam and semi-rigid foam. Its finished products are widely used in refrigerators, insulation materials, automotive trim and other industries.

From the perspective of supply, my country's MDI production capacity has grown steadily in recent years, and the growth rate has gradually slowed down. In the future, with the release of production capacity, MDI supply will continue to grow. From the perspective of demand, refrigerator-freezers account for the largest proportion of downstream consumption of polymerized MDI. In the past two years, the export demand for refrigerator-freezers has shown a positive growth trend, which will stimulate the growth of polymerized MDI market demand.

1. Polymeric MDI is mainly used for polyurethane rigid foam and semi-rigid foam

MDI refers to diphenylmethane diisocyanate, which is one of the most important raw materials for the production of polyurethane (PU). MDI is widely used in industries such as refrigerators, insulation materials, automotive trims, and construction. MDI is mainly divided into pure MDI and polymeric MDI. Pure MDI is mainly used for polyurethane sizing, polyurethane sole stock, and spandex; polymeric MDI is mainly used for polyurethane rigid foam and semi-rigid foam.

2. With the release of production capacity, the supply of MDI will continue to grow

From the perspective of supply, my country's MDI production capacity increased steadily from 2013 to 2019, from 2.14 million tons in 2013 to 3.42 million tons in 2019. The rapid release of production capacity from 2013 to 2015, with a growth rate of up to 25.70%; in 2017, the price of polymerized MDI appeared at a high price in the past 10 years, which stimulated the re-expansion of domestic MDI production capacity. As new production capacity is basically increased, demand is gradually increased. After digestion, the growth rate of production capacity has gradually slowed down. In 2019, the growth rate of my country's MDI production capacity was 2.70%.

my country has become the world's largest polyurethane producer and one of the largest polyurethane markets. Among them, Wanhua Chemical is the world's largest manufacturer and supplier of MDI. As a local company in the domestic MDI market, Wanhua Chemical's production capacity reached 1.8 million tons in 2019, more than half of the total production capacity.

In the next few years, China's MDI production capacity will continue to expand. It is expected that in the future, my country's MDI industry will still add 2.1 million tons of production capacity. With the release of production capacity, my country's MDI supply will further increase.

3. The increase in export demand for refrigerators and freezers will drive the market demand for aggregate MDI

my country's polymeric MDI consumption areas mainly include refrigerators and freezers, automobiles, adhesives and sealants, pipes and plates. According to the China Plastics Processing Industry Association's "China Plastics Industry Yearbook 2020" data, in 2019, my country's downstream polymer MDI consumption accounted for the largest proportion of the refrigerator and freezer industry, accounting for 43.55%; followed by automobiles, accounting for 11.78%.

China is the world's largest refrigerator supplier. China's refrigerators have been exported to more than 220 countries and regions, accounting for nearly one-third of the global (except China) refrigerator sales.

According to statistics from the General Administration of Customs, my country's refrigerator exports continued to grow from 2015 to 2020. In 2020, affected by factors such as the gradual warming of the weather and homes due to the epidemic, the demand for overseas refrigerators will increase sharply. The number of refrigerator exports in 2020 is 69.54 million units, an increase of 25.46% from 2019.

According to the China Plastics Processing Industry Association's "China Plastics Industry Yearbook 2020" data, the total downstream consumption of polymerized MDI in my country in 2019 was 1,174,100 tons, an increase of 1.90% over 2018. From 2018 to 2019, adhesives and sealants and refrigerator freezers increased by 8.17% and 5.05% respectively from 2018 to 2019; the largest decrease was in the automotive sector, which was 9.00% lower than 2018.

In 2019, the consumption of aggregate MDI in refrigerators and freezers, which accounts for the largest proportion of consumption, was 511,300 tons. The future growth in export demand for refrigerators and freezers is expected to drive the growth of aggregate MDI demand.