Overseas Up, China Down: The Global MDI Market Is Splitting Apart

The global MDI market is experiencing a rare regional divergence. Prices in North America have surged sharply, with some products rising by as much as USD 500–800/ton within a single day, while the Chinese market continues to weaken amid softening demand. As of last week, polymeric MDI prices in Shandong had fallen to RMB 18,200/ton, while pure MDI dropped to RMB 23,100/ton, with trading activity remaining under pressure.

The key driver behind the overseas rally is the sudden tightening of North American supply. On May 19, Covestro declared force majeure at its U.S. MDI facilities, suspending supplies of polymeric MDI, pure MDI, and modified MDI products. At the same time, Dow reduced operating rates at some MDI lines due to shortages of carbon monoxide and chlorine feedstocks. Meanwhile, Huntsman had already shut down its Louisiana MDI plant for maintenance. Combined, these disruptions have affected more than 1.1 million tons of MDI capacity in North America, accounting for nearly 70% of the region’s total capacity and rapidly widening the supply gap.

Even before the force majeure announcement, the market had already begun reacting to tightening supply conditions caused by raw material constraints and operational disruptions. In April, Covestro announced a global MDI price increase of USD 600/ton. Japan’s Tosoh subsequently raised prices by more than USD 500/ton, while Hungary-based BorsodChem increased MDI prices across Europe, the Middle East, and Africa by EUR 500/ton. After the force majeure officially took effect, the North American spot market became even more volatile, with traders and downstream buyers rushing to secure cargoes in advance, further amplifying price swings.

In sharp contrast, China’s domestic MDI market has failed to follow the overseas rally. As the traditional peak season gradually comes to an end, new orders from downstream sectors have weakened noticeably. Operating rates in TPU, slurry, coatings, and related industries have also declined, while end-user purchasing sentiment has become increasingly cautious. Most buyers are now purchasing only to meet immediate production needs, with speculative stocking activity largely disappearing and overall market circulation slowing significantly.

A more critical issue is that Chinese producers have been unable to fully benefit from the overseas price surge. Although the supply gap in North America is substantial, Chinese cargoes still face significant barriers entering the U.S. market due to tariffs, trade restrictions, and regional supply chain structures. At present, much of the North American shortfall is being filled by suppliers from Europe and Southeast Asia rather than China, limiting the transmission of overseas price increases into the domestic market.

As a result, the sharp rise in overseas prices has not been transmitted back to China as quickly as in previous cycles. The Chinese market is now operating under a relatively independent supply-demand dynamic. The traditional globally linked pricing system for MDI is gradually breaking apart, and future market volatility is likely to be increasingly influenced by regional policies, trade barriers, and geopolitical supply chain shifts.

Despite weakness in the spot market, profitability among Chinese MDI producers remains relatively strong. Over the past three months, the theoretical profit for large-scale polymeric MDI plants has reached around RMB 4,500/ton, more than 50% higher than the first-quarter average. With margins still healthy, producers have little incentive to implement aggressive production cuts. At the same time, downstream demand continues to soften, leaving the domestic market in a “stable supply, weak demand” environment that continues to pressure spot prices.