BASF Declares Product Force Majeure! Malfunction of The MDI Unit

On March 22, BASF announced that due to an unexpected equipment failure in the MDI unit at its North American plant in Geismar, the operation of the plant was affected. From now on, force majeure will be imposed on all Lupranate® MDI products and products containing MDI ingredients. effective. BASF is currently carrying out active maintenance on the equipment, and the production interruption is currently forecast to last about three weeks.

With the release of BASF news, the first force majeure event in the MDI industry this year also occurred. Last year, BASF's MDI plant in Geismar also suffered two force majeure events.

First, on August 29, 2021, the super hurricane "Ida" landed on the southern coast of the United States with a maximum sustained wind speed of 240 km/h. BASF immediately announced that its Geismar factory in Louisiana had encountered force majeure and had closed its 400,000 tons/year of MDI installations.

Second, on February 17, 2021, BASF issued a notice saying that from February 14 to 16, 2021, Louisiana and Texas, including the Geismar and Los Angeles areas, experienced prolonged severe weather and freezing temperature. Plant operations at BASF's Geismar manufacturing site have been affected by severe disruptions to critical raw materials and subsequent freeze damage at BASF's facilities. Therefore, BASF is declaring MDI, TDI, MDI/TDI blends and all polyol products effective immediately.

By the end of 2021, the global MDI production capacity will total 9.1 million tons/year, of which BASF's total global MDI production capacity is about 1.9 million tons/year, and the affected MDI production capacity this time accounts for about 21% of BASF's total production capacity.

As far as the current operation of MDI plants is concerned, all domestic manufacturers are running smoothly except for Chongqing and Shanghai BASF, which are operating at a low load. There is no obvious load reduction and announced maintenance plans. Affected by the Russian-Ukrainian war, the recent surge in natural gas prices in Europe may have a certain impact on the operating rate of foreign installations.

There are two types of MDI, one is aggregated MDI and the other is pure MDI. The main downstream of polymerized MDI are refrigerator freezers, automobiles, exterior wall pipe insulation and adhesives and other industries, while the main downstream of pure MDI are spandex, TPU, sole solution and pulp and other industries.

There are certain differences in the downstream low and peak seasons of the two products. The downstream refrigerator freezer and external wall pipe insulation industry of aggregated MDI are relatively obvious in the low peak season. The production peak season of the downstream refrigerator freezer is generally from March to May and September to October. Prepare inventory for the peak sales seasons of various festivals, but as in 2020 due to the impact of public health, the export of domestic refrigerators and freezers has been full, and basically the whole year is the peak production season; the peak production season of the external wall pipe insulation industry is August-October, generally domestic aggregation Most of the MDI market price peaks appear in the second half of the year, which is related to the peak season of the external wall pipe insulation industry in North and Northeast China.

The production peak season of pure MDI downstream spandex industry, sole solution and pulp industry is generally in March, September and October, and the peak season of TPU production is generally in June-October.

It can be said that as a highly cyclical product, MDI has an obvious peak season from the perspective of the whole year: the first half of the year is mainly concentrated in March to May, and it is often in a downward phase after May; in the second half of the year, August to October is in peak season, and other The period is low season. Looking back on the market last year, the MDI price has a strong price support at the position of 17,000 CNY/ton, which is mainly caused by the cost, the market and the oligopolistic industry situation.

Looking at the overall MDI market in 2021, the bottom price in January 2021 is 17,500 CNY/ton, which will rise rapidly after the year, and reach a high point (27,000/ton) in February. After that, the price fluctuates all the way down, reaching the bottom of the year in June. (16,000 CNY/ton), after that, three bands appeared in the MDI market. When the price of each band fell to 17,000 CNY/ton, the market quickly rose to 20,000/ton, and reached a high of 24,000 CNY/ton in the second half of the year during the peak season in October. Ton. Immediately following the deteriorating demand with the arrival of the off-season, the market price fell to 17,000 CNY/ton in December.

At the beginning of 2022, the price of MDI rose directly from 21,000 CNY/ton to 21,500 CNY/ton. The reason for the price surge may be the accumulation of traders' inventories, the strong willingness to increase, and the increase in domestic exports, which made the price quickly rise to a high point. . After the year, due to the cold weather and poor start of construction, the price fell to 18,000 CNY/ton. After that, the market price showed a rebound trend, rising from 18,000 CNY/ton to 19,500 CNY/ton, or even close to 20,000 CNY/ton. However, due to the recent spread of the epidemic across the country, the price fell rapidly again.

From the perspective of the follow-up supply side, BASF's 400,000-ton/year plant has been shut down, and Japan's Tosoh has an overhaul plan for the "7wt+13wt" plant from April to May. The 410,000-ton plant in South Korea's Kumho is expected to be completed in May. In addition, a 370,000-ton unit in Shanghai is expected to have an overhaul plan in May. Taken together, there may be some tight supply in the MDI market.