Pricing and Markets

March 21, 2023

MDI Overview

Global MDI Demand Growth Slow Down, MDI Facilities in Europe & USA Idled

PUdaily | Updated: March 17, 2023

On March 2, 2023, Covestro released its 2022 group report: “Fiscal 2022 was impacted by global challenges that had significant and perceptible effects on Covestro’s business performance. In particular, the sharp rise in energy and raw material prices during the year, especially in Europe, put a strain on the company. This was compounded by continuing adverse effects caused by the coronavirus pandemic in China, high inflation and an overall slowdown in global economic growth.” And according to Covestro’s report, the global MDI demand in 2022 was 8,250 k tons, increased by 0.2% year on year. The global MDI demand growth was slow down.

MDI Facilities in Europe & USA Idled, Global MDI Operating Rate Down

On February 21, 2023, Huntsman Corporation disclosed on its fourth quarter 2022 earnings call:

“Our Asian markets, primarily China, did experience modest volume growth in the quarter due to slightly improved demand in insulation and automotive when compared to the fourth quarter a year ago. Europe demand remained subdued…In the short-run, we are idling our smaller MDI line in Rotterdam for an extended period until end market demand improves…In the U.S., we’re seeing similar conditions due to rising interest rates…Our Geismar Louisiana MDI plant, we have closed one of our three lines that represents about 30% of our output.” The company’s spokesperson estimated that the operating rates are presently around 70% globally, which is lower than normal levels.

Huntsman’s MDI capacity in the Netherlands and the United States has reached 470 ktpa and 500 ktpa respectively. It means the idling capacity of Huntsman’s MDI facilities in Rotterdam and in Geismar totals about 300 ktpa.

Due to the declining operating rate of MDI facilities in Europe and the United States, as well as the high cost of upstream energy and raw materials, the PMDI market price in Europe is stable. The contract price is €2,400-2,550 /tonne, and the negotiated price is €2,300 /tonne, showing a weak status between supply and demand.

Construction:

Construction is the most important downstream sector for MDI in Europe and the United States. A major MDI supplier saw that two-thirds of their polyurethane Americas business went into construction-related end markets, approximately half into commercial construction, and half into residential, of which 70% was related to new residential builds.

Americas: New housing starts in U.S. totalled 18.67 million in 2022, a year-on-year decrease of 3.1%, according to Federal Reserve Economic Data. From 2020 to 2021, the US housing market revived rapidly amid Covid-19 pandemic and evolved into a real estate boom since the subprime mortgage crisis of 2007. The current housing boom arises from a combined effect of short cycle (post-Covid policy stimulus) and long-term cycle (inventory cycle after the subprime mortgage crisis). Since the Fed tightened monetary policy in 2022, the real estate market has borne the brunt, and drops in indicators such as home sales and market prosperity are comparable to those in the crisis of 2007-2008. Looking ahead to 2023, the U.S. housing market is expected to weaken, while the margin may be small.

New Housing Starts & Completions in U.S., 2018-2023

Europe:

Market instability has been exacerbated by the war in Ukraine and high inflations, which has dampened the intention to invest in new construction projects. In December 2022, construction output in the Euro Area fell by 2.5% month-on-month, reaching the largest decline in the past 18 months, according to Eurostat. Euroconstruct forecasts a significant slowdown in the growth rate of residential construction in Europe to 1.3% in 2024. This results from stagnation trends in both new residential construction and renovation (in 2024, growth is 1.5% and 1.2%, respectively).

Automobile:

Automobile is another major downstream industry for MDI in Europe and U.S.

Europe: On January 18, 2023, the European Automobile Manufacturers’ Association released a report showing that in 2022, as a result of component shortages, the European passenger car market contracted by 4.6% to 9.26 million units, the region’s lowest level since 1993, when 9.2 million units were registered. Agence France-Presse claimed that 2022 is the third difficult year for the European automobile industry. Since the Covid outbreak and the ensuing supply shortages, a large number of factories and showrooms were shuttered. The semiconductor shortage had not eased even after the pandemic stabilized. In 2022, Germany was the only country of the European market to have recorded growth in auto sales, with 1.1% increase. Sales in Italy, France and Spain fell by 9.7%, 7.8% and 5.4% respectively.

Americas:

U.S.A: Many automakers slashed production due to soaring feedstock costs and ongoing shortages of semiconductors and other components, according to Cox Automotive. Full-year 2022 U.S. auto sales are expected to be near 13.9 million units, a decrease of nearly 8.0% from 2021 and down 20% from the market peak in 2016.

Brazil: In contrast, the auto industry in Brazil performed better. The components shortage in Brazil’s auto industry had eased markedly in 2022, driving growth in the country’s auto output, according to Brazilian Association of Automotive Vehicle Manufacturers (Anfavea). Moreover, the increase in Brazilian auto exports to Latin American countries also boosted the rise in the country’s auto industry. Anfavea currently expects that Brazil’s 2023 auto output would rise by 2.2% to 2.42 million units.

http://www.pudaily.com/Home/NewsDetails/35233

March 15, 2023

PO Prices Rising in China Dragging Polyol Along for the Ride

Will PO Prices in China Rise to CNY 12,000/tonne in March?

PUdaily | Updated: March 7, 2023

Supply

In February, multiple PO facilities in China experienced overhauls, technical transformation, or output reduction, including Jishen Chemical, Qixiang Tengda, Yida Chemical, Satellite Chemical, Sinopec Tianjin, Sinopec Zhenhai, etc., involving a total capacity of 1.69 mtpa. The capacity utilization was around 60% in February. Moreover, the synchronous maintenance of overseas facilities resulted in a significant shrinkage of imported goods. Therefore, the overall supply of PO in China was tight. 

Demand

China’s February manufacturing PMI rose 6.9 percentage points month-over-month to 56.7%, indicating that China’s production activities are accelerating to pick up after getting rid of the impact of Covid-19 pandemic and the Spring Festival factor. Downstream manufacturers gradually recovered operation and saw sales increases in February. Besides, the costs of PO increased as the profit margin of chlorohydrin process further narrowed. As a result, PO prices in China kept moving up since February. On March 6, the prevailing offers of PO in Shandong and North China markets stood at CNY 11,100-11,200/tonne EXW in bulk in cash.

Forecast

In a promising March, polyurethane downstream industries are pinned on new hopes. The market sentiment has grown markedly. Thanks to successively convened exhibitions and consumption-based incentives, the demand is expected to further rise. With the approach of China’s Two Sessions, many local governments have issued control measures for the production and transportation of hazardous chemicals, so that the supply of polyurethane raw materials will be more or less affected. PO prices in China are projected to move around CNY 12,000/tonne.

http://www.pudaily.com/Home/NewsDetails/34965

March 3, 2023

European Polyol Update

European Polyol Prices are Decreasing Amid Weak Demand and Stock Replenishment


European Polyol Prices are Decreasing Amid Weak Demand and Stock Replenishment

  • 01-Mar-2023 3:11 PM
  • Journalist: Peter Schmidt

As per the data sources, Polyol prices have consistently decreased in the European region from the beginning of 2023. In February 2023, Polyol prices decreased by almost 3.2% from the previous month’s discussions. At the end of the week, which concluded on February 24, 2023, Polyether Polyol prices in Germany and the United Kingdom settled at USD 2800/MT and USD 2880/MT, respectively.

The key reason for this decline in Polyol prices is the stock replenishment amid fallen offtakes from the downstream Polyurethane producers due to weak orders for the Polyurethane foam from the domestic manufacturing sector for furniture and automotive seats. According to the data sources of the Federal Motor Transport Authority, car registrations fell by 43% in the European region in February 2023.

Previously during the Q4 of 2022, most of the Polyol supplies were imported from the Asian region amid plant shutdowns by producers because of high input costs in Europe due to a spike in Natural Gas prices.

The Polyol’s input costs have decreased significantly in the region, especially from the beginning of 2023, due to a reduction in Dutch TTF and the United Kingdom’s NBP Natural Gas futures on the back of LNG’s stock replenishment because of mild weather than anticipated, further reducing the variable costs.

On the contrary, prices of Propylene Oxide, a key feedstock of Polyol, rose slightly during the past few weeks in the European region due to the spike in upstream Naphtha prices because of the recent ban and sanctions on Russian products from February 5, which increased the cost pressure.

As per the ChemAnalyst estimation, “Polyol price trend is likely to remain weak in March due to sufficient availability of product supplies. At the same time, various plants in the region are going for maintenance shutdown, including Toluene Diisocyanate plants, indicating sufficient availability of Polyurethane components.

https://www.chemanalyst.com/NewsAndDeals/NewsDetails/european-polyol-prices-are-decreasing-amid-weak-demand-and-stock-replenishment-16580

March 3, 2023

February Propylene Settles Up 7c/lb

Chemical Grade Propylene settles at $0.485/lb in February

February 28, 2023

European Benzene

European Benzene Pressure Continues to Mount, Phenol Prices are on the Rise, MDI Producer Idles Unit


European Benzene Pressure Continues to Mount, Phenol Prices are on the Rise, MDI Producer Idles Unit

  • 22-Feb-2023 3:18 PM
  • Journalist: Robert Hume

Hamburg (Germany): In the European market, the continuous increase in Benzene prices has made headlines, and producers have failed to face the heat of the rising prices. In the latest turn of events, Huntsman Corporation announced the idling of one of their Methylene Diphenyl Diisocyanate (MDI) plants in Rotterdam. The company announced that the unfeasible economics and sluggish demand drove the announcement.

Earlier, Huntsman Corporation has already idled one of their MDI units in Geismar, Louisiana.

In Europe, Benzene prices have increased by more than 50% since the beginning of the year, and the mounting pressure of rising prices has been more than evident.

Benzene forms a critical intermediate to several fundamental petrochemicals, MDI, Phenol, Cyclohexanone, and many others. MDI goes into Polyurethane production; while Cyclohexanone is a crucial part of Polyamide value chains and Phenolic Resins, Caprolactam is an important source of the demand for Phenol.

The incessant rise in Benzene prices has disrupted the economics of several downstream value chains. The high energy price pressure and firm cost support have translated into rising Cumene prices. Furthermore, the unbearable pressure of the Benzene prices has translated not only on the direct downstream but also on their derivatives; the sharp rise in Phenol has been a case in point.

Europe has been facing a double whammy, rising cost pressure and weak downstream demand, which has made the producers swallow a tough pill. The producers have become the shock absorbers between the soaring energy prices and the ultimate consumers. Huntsman has stated that they won’t be carrying on being the shock absorbers anymore.

Huntsman Corporation has implemented energy surcharges since the sharp climb in energy prices; however, the impact of energy surcharges has been limited at the very most. Thus the idling of production units comes as the last resort for the MDI producer to stay afloat.

China has eased covid restrictions and increased in demand since the conclusion of the Lunar New Year holidays, suggesting the changing market dynamics after the 2022 debacle. The improving economics in China also bodes well for the global economy as China forms a crucial production house as well as a key end-use market for several products that the Western market exports heavily.

https://www.chemanalyst.com/NewsAndDeals/NewsDetails/european-benzene-pressure-continues-to-mount-phenol-prices-are-on-the-rise-mdi-15523