TDI Supply Tightens and Prices Surge: Can Cangzhou Dahua Reap the "Chemical Dividend"?

In July, the TDI market witnessed a “super rally,” with prices soaring nearly 40% in just two weeks, bringing the long-quiet chemical sector back into the spotlight. As one of China's major TDI producers, Cangzhou Dahua saw its share price skyrocket and drew strong investor attention. But can the company truly capitalize on this opportunity and turn the price surge into a performance rebound?

1. Why Did TDI Prices Surge Suddenly? Supply-Demand Imbalance Is Key
TDI (Toluene Diisocyanate) is a crucial chemical raw material primarily used in the production of flexible polyurethane foam, widely applied in appliances, furniture, and automotive interiors. Its price is highly sensitive to changes in supply and demand.

In mid-July, Covestro’s Dormagen plant in Germany suffered a substation fire that disrupted chlorine supply and led to the shutdown of a 300,000-ton/year TDI production line—approximately half of Europe’s TDI capacity and about 9% of global output. This caused an immediate global shortage.

At the same time, Chinese producers such as Shangju Li, Gansu Yin Guang, and Fujian Wanhua entered planned maintenance, causing domestic effective capacity to fall significantly. TDI plant operating rates dropped below 60%. Under this dual supply shock, prices surged rapidly. As of July 26, the average domestic TDI price had jumped to RMB 17,100 per ton, a more than 40% increase from earlier levels.

2. Market Heats Up Over Cangzhou Dahua—But Is the "Chemical Dividend" Already in Hand?
Cangzhou Dahua is one of China’s key TDI manufacturers, with an annual capacity of approximately 160,000 tons, accounting for around 10% of national output—second only to Wanhua. Spurred by the supply shortage, the capital market responded quickly: the company’s stock price soared nearly 50% in just a week, with a monthly gain of nearly 40% and a market value exceeding RMB 6 billion.

Some investors speculated whether it could become the next high-flying stock like Lianhua Technology. However, a rational analysis suggests that the so-called "dividend" is not immediately realized. In Q1 2025, Cangzhou Dahua reported revenue of RMB 1.053 billion, a year-on-year decrease of 15.43%, and net profit attributable to shareholders of only RMB 8.11 million, down nearly 60%. Its gross profit margin was only 7.48%, significantly lower than Wanhua’s over 15% during the same period, indicating that rising costs had severely eroded profits.

3. Non-TDI Businesses Dragging Performance—Structural Issues Need Urgent Fix
Cangzhou Dahua’s revenue is not solely reliant on TDI. Its bisphenol A (BPA) segment has been a persistent loss-maker, accounting for about 23% of revenue and acting as a performance drag. Meanwhile, its polycarbonate (PC) project, although showing a gross margin of 11.5%, still contributes a relatively small portion (around 28%) of total revenue. The company’s current product structure limits its ability to fully benefit from the TDI price hike.

4. Can It Truly Reap the Benefits? Three Key Factors Will Decide
In the context of the current TDI boom, whether Cangzhou Dahua can seize this market opportunity depends on the following three factors:

Can TDI Prices Stay High?
In the short term, Covestro’s recovery from the fire will take 2–3 months, and many domestic TDI facilities are still under maintenance. This supports continued high prices through Q3. However, as Wanhua, Yin Guang, and Shangju Li resume production, supply constraints may ease, leading to potential price corrections. The medium-term outlook remains uncertain.

Can Raw Material Costs Be Controlled?
In Q1, Cangzhou Dahua’s costs rose 11.6% year-on-year, far exceeding revenue growth. This was mainly due to persistently high prices of toluene and coal, along with rising logistics and electricity costs. Without easing input costs, even further TDI price increases may not translate into substantial profit.

Can Capacity Expansion and Product Optimization Be Achieved?
Cangzhou Dahua has plans to build an additional 225,000-ton/year TDI plant, which would raise total capacity to 385,000 tons/year—making it the second-largest domestic producer. Its PC business is also advancing. If expansion proceeds smoothly and operational efficiency improves, the company’s profitability could strengthen over time.

In summary, the sudden global TDI supply shortage has opened a short-term window of opportunity. Cangzhou Dahua has emerged as a hot stock amid this rally, but real profit growth is not guaranteed. The company must navigate high costs, improve product mix, and execute expansion plans effectively. Whether it can fully realize the "chemical dividend" depends on its Q3 performance and beyond.