London (ICIS)-Supply disruptions this week shook the European polyurethane (PU) market. Flexible and rigid foam producers have been struggling to cope with the shortage of isocyanate and polyol raw materials, strong demand, and the sharp increase in prices in October.
"It's not just tight," said a European polyurethane foam producer. "We can't produce today, and we can't tomorrow."
The October isocyanate contract evaluated this week has increased by EUR 300/ton from September. The October contract of polyol climbed to the highest level since 2015.
TDI's toluene diisocyanate (TDI) market weakened further this week after the manufacturer Covestro announced force majeure for its products in Europe, the Middle East and Africa after a pump failure at its Dormagen plant. Previously, production at the Ludwigshafen plant operated by BASF, the largest producer in the region, encountered force majeure.
Foam producers have been struggling to cope with delayed raw material orders, and in some cases had to cancel customer orders.
"Everyone is irritated," said a European isocyanate distributor, referring to recent price increases and order cancellations. "Contracts are being cancelled everywhere."
The recent sharp increase in the cost of flexible polyurethane foam raw materials has also caused difficulties, and these increases cannot be passed on to customers immediately.
A foam producer said: "We can't eat every price increase," and pointed out that there are concerns that foam buyers will turn to alternative products such as latex and spring mattresses.
"The problem then is that we need to retake our market."
The shortage of stocks means that despite the current strong demand, some factories will still be closed.
"The decision now is which factories to close," said a European foam producer. "There is a severe lack of materials, and it is almost impossible to obtain materials from external sources."
The October TDI contract price assessed this week increased by 300 Euro/ton at the upper and lower limits of the range, to 2,250-2,600 Euro/ton FD (free delivery) Western Europe (Western Europe).
This is the fourth consecutive month that the TDI contract price has risen and is currently at its lowest level in 2018. The current price range is 850-1,150 Euro/ton higher than the level reached in June this year.
Feedback on the October contract was heard between 1,800-2,700 euros/ton FD W Europe, an increase of 150-450 euros/ton from September levels, although it is believed that most of the business is within a narrower range ongoing.
Crude oil MDI demand in the crude diphenyl diisocyanate (MDI) market in October was exceptionally strong, with limited supply or shortage.
"Demand is ruthless," said a rigid foam producer, referring to construction activity exceeding expectations in recent months.
The lower limit of the October crude oil or polymerized MDI (PMDI) contract evaluated this week climbed 50 Euro/ton, and the upper limit climbed 70 Euro/ton to 1,600-1,900 Euro/ton FD W Europe.
I heard that the contract price in October is between 1,500-2,000 Euro/ton FD W Europe, and the price in September has changed between the rollover period and an increase of 120 Euro/ton.
It is believed that most of the business is conducted within a narrow range.
There were several unconfirmed reports this week that Covestro’s supply was affected, and Covestro has three MDI production bases in Europe.
Production problems have caused rigid foam suppliers to cancel some orders, and the high demand levels in November are expected to continue.
Pure MDI Demand for pure or monomeric MDI (MMDI) has improved in Turkey and the Middle East, and the output of shoe soles has increased.
"You can easily increase prices in the Middle East and Turkey because there is basically no supply," said a European pure MDI producer.
The October contract evaluated this week climbed 50-100 Euro/ton to 1,850-2,100 Euro/ton FD W Europe.
I heard a wide range of feedback on the October contract, ranging from 1,650-2,400 euros/ton FD W Europe, and the range of changes starting from September was from the extension to an increase of 250 euros/ton. It is believed that most of the business is conducted within a narrow range.
Polyols Due to the limited supply of propylene oxide (PO) and ethylene oxide (EO) as raw materials and strong downstream demand, the supply of polyols in the European polyol market is tight.
"Demand is much higher than our supply," said a European polyol producer.
This week, the October regular polyether polyol contract was evaluated. The lower limit rose by 150 euros/ton, and the upper limit rose by 100 euros/ton to 1,650-1,850 euros/ton.
The upper limit of this range is currently at the highest level since January 2015.
The feedback of October contract settlement heard this month ranges from 1,450-1,880 euros/ton FD (free delivery) to NWE (northwestern Europe) depending on grade, quantity and location. Feedback on September's gains is also extensive, ranging from low-end 50 Euros/ton to high-end 300 Euros/ton. In both cases, most of the business is considered to be conducted within a narrow range.
The current supply is tight or in short supply, and the manufacturer Dow's polyols still have force majeure. Other manufacturers, including Repsol, also have unconfirmed reports of supply restrictions.
Demand for flexible foam is strong and supported by the home renovation boom related to the coronavirus pandemic lockdown. It is expected that by the end of this year, furniture demand will remain strong.
Focus Article by Fergus Jensen
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