The High Temperature Continues to Bake Europe, and the Supply Tension in the Polyurethane Market May Intensify

High dependence on water transportation, increasing cost pressure in European energy and chemical market

The Rhine River, which flows through many European countries, is known as the golden waterway of Europe. There are many industries, especially chemical companies, in the upper and lower reaches of the river. The low water level of the river affects the cost and operation of chemical plants. This logic may not be familiar in China. This is because the European side controls the land transportation of chemical products very strictly. Therefore, the material and finished product transportation of chemical products has always relied on water transportation and fire transportation. Water transportation is superior to fire transportation in terms of cost and convenience, and is the most important logistics method in Europe; in addition, it also provides cooling water for devices. Since this summer, due to climatic reasons, Europe has not only been dry and drier, but also has been scorched by high temperatures since July. In addition, the energy problem continues to escalate in Europe, and the cost of natural gas is high, and the operating costs of related chemical plants continue to push up.

In addition, it is not the first time that the water level of the Rhine River is too low. As early as November 2018, due to the continuous drought, the water level of the Rhine River continued to drop. There have been cases where the relevant chemical plants have been reduced or even stopped to declare force majeure, which has further caused supply shortages. Push up prices.


Chemical installations on both sides of the Rhine are greatly affected

Among the many chemical companies located on both sides of the Rhine, BASF and Covestro in Germany have the most varieties of polyurethane. BASF's chemical production base in Ludwig, Germany, has the following production capacities for polyurethane products: 300,000 tons of TDI units, 125,000 tons of propylene oxide units, 80,000 tons of neopentyl glycol units, and 36,000 tons of MDI units. Germany Covestro has a 580,000-ton MDI plant and a 300,000-ton TDI plant. The two also have installations in other European countries. In addition, Europe also has a production capacity of 450,000 tons of BDO, a production capacity of 1.1 million tons of adipic acid, and a production capacity of 350,000 tons of propylene glycol. The country's chemical manufacturers have been under pressure from the surge in costs in all aspects since the second quarter.

As early as April this year, the TDI plant of BASF in Germany has been shut down, and it has continued to this day; the TDI plant of Covestro in Germany also shut down and declared force majeure after the load reduction in July. It is reported that due to the problem of chlorine gas supply, it may continue for a long time. Other related polyurethane installations also have different problems.

In fact, the problems and pressures faced by the European energy and chemical market continued to escalate in the first half of the year. Previously, due to geopolitical turmoil, the price of natural gas in Europe continued to soar. Natural gas is both an energy source and a raw material in chemical production. Cost of production. However, the current risk of sailing off the Rhine has put additional pressure on relevant chemical companies and increased costs.


Regional supply and demand imbalance is good for Asian exports

For the global chemical market, the flow in the ocean market is usually guided by arbitrage space, supply gap, demand increment, etc., and there are also some groups that adjust goods globally. Recent issues in the European market, such as cost changes and supply instability caused by the situation, are leading to the formation of new supply gaps and the expectation of arbitrage space.

By extension, the instability of regional supply will directly lead to changes in the flow of regular sources of goods. In addition to supplying this region, European polyurethane products also flow steadily to Africa, the Middle East, North America and other regions. Before this year, they also flowed steadily to Russia. However, as the cost continues to soar, which affects the continuity of plant operation, the stability of external supply of European sources has declined. The demand from the relevant radiation areas will be transferred to other supply places. Asia's polyurethane production capacity is abundant and huge, and the operation stability during the year is high, and it has the conditions and willingness to supply globalization.