Accident Impacts Chinese MDI Production

MDI Upstream Raw Material Supplier Exploded, the Impact to China MDI Market

PUdaily | Updated: February 28, 2023

On February 24, during the maintenance period of Chongqing Yingtianhui Chlor-alkali Chemicals Co., Ltd, the storage tanks exploded, causing 1 death and 3 injuries, According to Emergency Management Agency of Chongqing Changshou Economic and Technological Development Area report on February 25, the investigation has been launched to determine the reason for the accident.

Yingtianhui is one of the upstream suppliers for BASF Chongqing’s MDI plant, supplying liquid chlorine and caustic soda.

What is the impact of explosion on China’s MDI market?

Due to the unexpected explosion, BASF Chongqing’s MDI facility, which was originally scheduled to restart this week, cannot redetermine the restart schedule. BASF has stopped trading MDI products since February 24. Subsequently, traders turned more reluctant to sell low and hold a wait-and-see stance. Some of them raised their offers slightly over the weekend.

Actually China’s MDI market had shown strong trend signals before the explosion.

February Market Review: In February, China’s MDI market showed a trend of “strong uptrend-pullbacks-rebound”. In early February, the major suppliers raised their list prices, and Covestro’s weekly guide prices were higher than market expectations. The MDI market showed a strong uptrend due to short supply after Spring Festival holiday, and some downstream manufacturers actively stocked up. But the market turned weak since the second week, and demand in industries such as pipe insulation and panels recovered slowly. Meanwhile, more speculative traders lowered offers to sell low-cost sources obtained before holidays, and low-priced Middle Eastern imports flooded into the market, driving market prices to stop hikes and experience slight pullbacks. In late February, prices of aniline, the main feedstock of MDI, kept rising. On February 24, mainstream reference offers of aniline in China had risen to CNY 12,350/tonne, lending a firm support to the MDI market. Most traders speculated that suppliers were willing to boost the MDI market in March, so the market stopped rising and moved sideways. Negotiation prices rebounded slightly.

March Market Forecast: The major MDI suppliers in China will unveil their March list prices and February settlement prices today and tomorrow. Traders have held a strong wait-and-see mood, expecting that suppliers guide prices would be high. Besides, due to ongoing maintenance of MDI facilities in Ningbo and Chongqing, the current operating rate of MDI remains low around 70%. If the Chongqing facility fails to restart as scheduled, the supplier may continue to control its supply in the near future. With probably high list prices in March and controlled supply, traders may raise their offers. And after consumption of low-cost sources, there will also be a support for the uptrend in March MDI market.

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