Asian TDI Update

China Domestic TDI Market Boosted by Northeast Asia Supply Shortage

2016-04-12    [Source:PUdaily]

PUdaily, Shanghai—TDI imports from northeast Asia has boomed by up to USD 250/ton to USD 1,680-1,800/ton on CIF basis to China driven by unexpected supply shortage after majors run into planned and unplanned shutdowns in Japan and South Korea.

That fresh offer is equivalent to RMB 13,800-14,700/ton (exchange rate 6.47 on Apr. 5, 2016) when adding 6.5% of tariff, 17% of value-added tax and about RMB 200 declaration charges, according to pricing data from PUdaily.

Constrained operating coinciding with preventive maintenance in Japan and South Korea are mainly responsible for the rally in market. The two countries are in leading position as TDI supplier in Asia market.

One of the three manufacturers in South Korea with nameplate capacity of 150 kt/year shut down two lines early March for around one-month scheduled turnaround whilst other two producers sustain reduced operating at the same time, according to market sources. (More details see below table)

Furthermore, the manufacturing facility in Omuta, Japan has encountered equipment defect in middle March that forces it to shut down, according to latest sources closed to the company. The supplier does not offer quotations now in Southeast Asia.

Looking at domestic market in China, mainstream prices of home-made TDI in south and east China are just reported close to RMB 11,300-11,500/ton on DEL and invoice included whilst TDI supplied by the two majors in Shanghai are a little bit higher at RMB 11,800-12,000/ton in the market, according to PUdaily pricing data on Apr. 5.

When comparing the local price range of RMB 11,300-12,000/ton to that of imports, the spread is estimated at RMB 2,500-2,700/ton, necessarily implying a big rally fueling domestic market. (See below graph; USD price: Hong Kong spot price, CIF China; RMB price: E-China)

The supply shortage of imported cargoes helps relieve in a degree increasing stockpile pressure at local plants in China and price pickup at imports also gives impetus to sellers as RMB offers are much more competitive right now.

At present, prices in east China are assessed at RMB 11,700-12,500/ton on Apr. 11 on DEL and invoice included, posing gains of RMB 300-500/ton from Apr. 5, the first session after Tomb-sweeping day.

However, some market players conceded that selling remains not easy, though the bullish views are pervading in market, since end users prefer not buying into rises and setting back purchasing curbed by actually tepid demand.

Looking at the outlook, there is no price softening likely seen in follow week but the likelihood for more price advances is also limited. 

Table: Japan and South Korea TDI Producers Operating

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