London (ICIS)-Polyurethane (PU) raw materials fell to a multi-year low in April, reversing the March gains due to the coronavirus pandemic forcing factories to close, leading to general cancellations and delays of isocyanate and polyol orders, and an increase The downward pressure on the industry has been reduced.
Polyols, toluene diisocyanate (TDI), crude diphenylmethane diisocyanate (MDI) and pure MDI April contracts are evaluated as up to three-digit discounts in some cases, because demand has basically disappeared and most of the bubbles The manufacturer is currently closed. The industry expects that with the sharp drop in crude oil prices, upstream raw materials will face further pressure.
"No one buys anything," said European distributors of isocyanates and polyols.
Although the issue of lifting the blockade and resuming factory work has been discussed, it is not clear how long it will take for the polyurethane market to return to normal. The outlook for May is still clouded.
"The government doesn't know... our customers don't know [and] our customers' customers don't know either," said a European isocyanate producer. "Just wait and see."
Crude oil MDI April crude oil or polymerized MDI (PMDI) contract range is estimated at 1,150-1,290 euros/ton FD (free delivery) Western Europe (Western Europe)-a record low-the low end fell by 140 euros / ton, and the euro was 70/tonne The upper limit of the range.
Although there was a rollover in some cases earlier this month, the absolute price of the offer showed a significant drop due to the general closure of automobile factories and stagnant construction demand in certain areas. The closure resulted in the cancellation and delay of a large number of orders this month, and in some cases, manufacturers reserved inventory for customers.
"No one will enter the market," said a European isocyanate distributor. "People now only buy what they need. They don't intend to have high inventory levels."
Most MDI producers in the region are now operating at the lowest operating rate. Although some factory restarts have been discussed, the market is expected to face continued downward pressure in May, especially when imports from China and South Korea are expected .
"Everything has become so slow now," said the European isocyanate distributor.
Pure MDI March pure MDI or monomer MDI (MMDI) contract range is estimated at 1,650-1,950 Euro/ton FD W Europe, the lower limit drops 350 Euro/ton, the upper limit drops 250 Euro/ton, and the lowest since June 2010 level.
Earlier this month, I heard of rollovers, double-digit growth and discounts, and in some cases, deals negotiated before the price of raw materials plummeted. However, the absolute price level of pure MDI reflects a greater decline.
"Most customers stop ordering MMDI," said an Asian isocyanate exporter. "This has caused prices to fall sharply."
Demand for pure or monomeric MDI (MMDI) in major markets such as Italy and Turkey collapsed due to coronavirus-related lockdowns and preventive measures, forcing footwear and car factories in the region to suspend production.
Due to its relatively short shelf life, the MMDI market is also facing a high degree of caution from buyers. There is an unconfirmed report that production problems at the Borsodchem plant in Kazincbarcika, Hungary have affected production. Most manufacturers are considered to have reduced production to a minimum.
TDI’s April TDI contract price range was estimated at 1,450-1,600 Euros/ton FD W Europe, the lower limit dropped by 170 Euros/ton, the upper limit dropped by 110 Euros/ton, and fell to September 2005.
In some cases, rollovers can be heard, but the absolute price levels reported indicate a greater decline.
“All [foam producers] are still in a state of shutdown-no restarts this week, stores closed, shopping malls closed [and] the automotive industry is down,” said a European isocyanate producer.
The closure caused a large number of order cancellations and delays, especially due to concerns about supply security, and some buyers filled their inventory in late March.
"In many cases, the initial estimates and promises-we have to face the reality that it has completely changed," the producer added. "No one can tell us how much they want. Some customers want zero."
A small amount of PU products will enter the healthcare field, including hospital bedding.
Although BASF permanently closed its TDI plant in Schwarzheim, Germany at the end of March, there is no shortage of materials because it is believed that producers in the region have reduced production to a minimum.
The industry is waiting for new news about when the blockade will be lifted, but the outlook is still clouded, and demand is expected to continue to slump until May.
"We are all tired of this bad situation," said a European TDI and polyol buyer. "We only sell small batches for small customers [and] only one day a week."
"If the situation remains the same in May, I don't think I will buy anything."
Polyol April polyol contract price is estimated at 1,400-1,550 Euro/ton FD NW (Northwestern) Europe, the lower limit drops by 200 Euro/ton, and the upper limit drops by 145 Euro/ton. Prices are currently at their lowest level since February 2010.
In some cases, rollovers can be heard, but most of the feedback and the absolute price level of the quotes indicate a significantly greater decline.
Bedding and furniture stores and car factories in the area are still closed, so most soft foam producers have closed. These closures caused a large number of order cancellations and delays this month, especially because some buyers had already filled up their inventory in March.
A European polyol producer said: “After people thought they would encounter logistics problems, the cancellation of orders in April was very obvious.”
A small amount of PU products will enter the healthcare field, including hospital bedding.
The industry is waiting for new news about when the blockade will be lifted, but the outlook is still clouded, and demand is expected to continue to slump until May.
Although the supply of most polyol producers has decreased, slowing demand and falling crude oil prices are expected to continue to put downward pressure on the market.
"Of course, our inventory is increasing, but we will wait and see," said a European polyol producer. "We will prepare for economic recovery."
MDI is mainly used in polyurethane foam, accounting for about 80% of global consumption. Rigid foam is the largest export of MDI and is mainly used for construction, cold storage, packaging and insulation. MDI is also used in the manufacture of adhesives, elastomers, adhesives, sealants, coatings and fibers.
TDI is mainly used in the production of PU soft foams for upholstery, mattresses and car seats.
Polyols are usually reacted with isocyanates to produce PU, which is used to make foam insulation materials for mattresses, appliances (refrigerators and freezers), home and car seats, elastic soles, fibers and adhesives.
Focus article by Fergus Jensen (Thumbnail: A mural of a masked woman cycling through London. Image credit: James Veysey/Shutterstock)
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