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VOLUME XXI
September 14, 2023
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September 21, 2020
Middle East isocyanates, polyols supply to stay tight
Author: Prateek Pillai
2020/09/01
SINGAPORE (ICIS)–Isocyanates and polyol markets in the Middle East have been characterized by persistent supply tightness, which is expected to continue in the next few months.
Demand for toluene diisocyanates (TDI), polymeric methylene diphenyl diisocyanates (PMDI) and polyols has considerably outpaced supply over the past four to five weeks.
While a pick-up in demand has played a role, the biggest factor for the state of affairs has been constricted supply amid widespread turnarounds and low operating rates in both Europe and Asia.
The Middle East sources the bulk of its isocyanates and polyols imports from the two regions.
In Europe, supply shortfalls of 20% for PMDI and 30% for TDI are estimated due to turnarounds at major production plants.
Consequently, export allocations to the Middle East have slowed to a trickle in an effort by European producers to meet domestic demand.
Polyol cargoes that were scheduled for September shipments are sold-out, with some European and Asian producers running out of October cargoes as well.
This is true for both the most heavily traded 10-13.5% polyether polyols (POP) variety as well as conventional polyols, which are traded at relatively lower volumes in the Middle East.
Though polyol production units have generally not seen the sort of turnarounds that has been prevalent in the isocyanates market, most suppliers to the Middle East are currently running on significantly reduced operating rates, resulting in supply tightness.
Faced with collapsing demand when countries across the world were implementing lockdowns earlier in the year, most producers lowered operating rates to stave off large losses.
Over the past few weeks, however, as more economies have re-opened, markets began to see a spike in demand.
As pent-up consumption spending has come to the fore, sales of rugs, mattresses and other foam-based products have surged, lifting up demand for isocyanates and polyols – which are used in foam production – in the process.
Producers were largely caught unaware by the demand surge and were slow to ramp up output.
Although some plants have now begun to increase operating rates, the process is expected to take time.
Even after plant turnarounds end and other producers raise output, supply may stay tight for the Middle East since regional demand typically peaks in September as the summer heat recedes and as consumer spending increases.
Focus article by Prateek Pillai
September 21, 2020
Middle East isocyanates, polyols supply to stay tight
Author: Prateek Pillai
2020/09/01
SINGAPORE (ICIS)–Isocyanates and polyol markets in the Middle East have been characterized by persistent supply tightness, which is expected to continue in the next few months.
Demand for toluene diisocyanates (TDI), polymeric methylene diphenyl diisocyanates (PMDI) and polyols has considerably outpaced supply over the past four to five weeks.
While a pick-up in demand has played a role, the biggest factor for the state of affairs has been constricted supply amid widespread turnarounds and low operating rates in both Europe and Asia.
The Middle East sources the bulk of its isocyanates and polyols imports from the two regions.
In Europe, supply shortfalls of 20% for PMDI and 30% for TDI are estimated due to turnarounds at major production plants.
Consequently, export allocations to the Middle East have slowed to a trickle in an effort by European producers to meet domestic demand.
Polyol cargoes that were scheduled for September shipments are sold-out, with some European and Asian producers running out of October cargoes as well.
This is true for both the most heavily traded 10-13.5% polyether polyols (POP) variety as well as conventional polyols, which are traded at relatively lower volumes in the Middle East.
Though polyol production units have generally not seen the sort of turnarounds that has been prevalent in the isocyanates market, most suppliers to the Middle East are currently running on significantly reduced operating rates, resulting in supply tightness.
Faced with collapsing demand when countries across the world were implementing lockdowns earlier in the year, most producers lowered operating rates to stave off large losses.
Over the past few weeks, however, as more economies have re-opened, markets began to see a spike in demand.
As pent-up consumption spending has come to the fore, sales of rugs, mattresses and other foam-based products have surged, lifting up demand for isocyanates and polyols – which are used in foam production – in the process.
Producers were largely caught unaware by the demand surge and were slow to ramp up output.
Although some plants have now begun to increase operating rates, the process is expected to take time.
Even after plant turnarounds end and other producers raise output, supply may stay tight for the Middle East since regional demand typically peaks in September as the summer heat recedes and as consumer spending increases.
Focus article by Prateek Pillai
September 21, 2020
Furniture, appliance shortage impacting East Texas retailers
Many customers are experiencing longer than normal wait times for orders on furniture and appliances due to the pandemic.
Author: Channing Curtis Published: 8:02 PM CDT September 17, 2020 Updated: 8:07 PM CDT September 17, 2020
TYLER, Texas — With so many of us at home more than usual, it’s easy to start thinking about buying some new furniture or replacing some of your older appliances, but if you’re hoping to get a new couch in the next few months, think again.
“You had factories being closed down for a large amount of time,” Brian Adams, Operations Manager at Adams Furniture and Appliances, said. “Factories started open back up, but they have to be spaced out for social distancing. So they’re working at a 50% workforce. And then all of a sudden, you had the demand just go through the roof. I mean, consumers got out. They were getting a stimulus money. They were getting extra unemployment money. So they had disposable income. And everybody went out and bought furniture. So that just put a huge kink. And so yes, right now, it is a struggle.”
Adams speaks with manufacturers weekly. He says the wait time on many items has drastically increased due to the coronavirus pandemic.
“There’s certain companies that usually we can order from them in two to three weeks and have the customers product on a special order and most of those companies right now are 12 to 14 weeks,” Adams said.
It isn’t just furniture that’s on back order right now. Adams says people rushing to the grocery stores at the beginning of the pandemic caused other shortages as well.
“A lot of people were going to the grocery store so freezers disappeared,” Adams said. “Matter of fact, we still can’t hardly get any freezers. We’ve hit a wall just on your basic washer and dryer, I mean, I was just on a call the other day if I place an order right now for that, it’s January.”
Adams says he tries to be upfront with customers about what’s going on and how long it takes for items to get in.
“We’ll have a customer come in the store right now and we’ll tell them, they’ll pick out a sofa and loveseat like, OK, if you ordered this right now we can have it in about let’s say it’s 10 weeks,” Adams said. “And they’re like, OK, well, we’ll think about it. I’m like, just remember, we’re quoting you 10 weeks if you order right now, if you wait another week, it might be 14 weeks because there’s companies all over the country placing orders daily, and it’s just backing up.”
While some manufacturers believe supply will be back to normal in January or February, Adams says it could be much longer than that.
“I think we’ve reached the point where most consumers now are understanding because obviously it’s not just the furniture business,” Adams said. “It’s not just the appliance business. It’s all over the map right now.”
September 21, 2020
Furniture, appliance shortage impacting East Texas retailers
Many customers are experiencing longer than normal wait times for orders on furniture and appliances due to the pandemic.
Author: Channing Curtis Published: 8:02 PM CDT September 17, 2020 Updated: 8:07 PM CDT September 17, 2020
TYLER, Texas — With so many of us at home more than usual, it’s easy to start thinking about buying some new furniture or replacing some of your older appliances, but if you’re hoping to get a new couch in the next few months, think again.
“You had factories being closed down for a large amount of time,” Brian Adams, Operations Manager at Adams Furniture and Appliances, said. “Factories started open back up, but they have to be spaced out for social distancing. So they’re working at a 50% workforce. And then all of a sudden, you had the demand just go through the roof. I mean, consumers got out. They were getting a stimulus money. They were getting extra unemployment money. So they had disposable income. And everybody went out and bought furniture. So that just put a huge kink. And so yes, right now, it is a struggle.”
Adams speaks with manufacturers weekly. He says the wait time on many items has drastically increased due to the coronavirus pandemic.
“There’s certain companies that usually we can order from them in two to three weeks and have the customers product on a special order and most of those companies right now are 12 to 14 weeks,” Adams said.
It isn’t just furniture that’s on back order right now. Adams says people rushing to the grocery stores at the beginning of the pandemic caused other shortages as well.
“A lot of people were going to the grocery store so freezers disappeared,” Adams said. “Matter of fact, we still can’t hardly get any freezers. We’ve hit a wall just on your basic washer and dryer, I mean, I was just on a call the other day if I place an order right now for that, it’s January.”
Adams says he tries to be upfront with customers about what’s going on and how long it takes for items to get in.
“We’ll have a customer come in the store right now and we’ll tell them, they’ll pick out a sofa and loveseat like, OK, if you ordered this right now we can have it in about let’s say it’s 10 weeks,” Adams said. “And they’re like, OK, well, we’ll think about it. I’m like, just remember, we’re quoting you 10 weeks if you order right now, if you wait another week, it might be 14 weeks because there’s companies all over the country placing orders daily, and it’s just backing up.”
While some manufacturers believe supply will be back to normal in January or February, Adams says it could be much longer than that.
“I think we’ve reached the point where most consumers now are understanding because obviously it’s not just the furniture business,” Adams said. “It’s not just the appliance business. It’s all over the map right now.”
September 18, 2020
Covestro stock jumps on Apollo’s potential takeover but probability of deal still low
Author: Morgan Condon
2020/09/18
LONDON (ICIS)–Covestro shares jumped on Friday as US investment fund Apollo could be eyeing a takeover of the German chemicals major, although the probability of a deal is still very low, according to chemicals equity analysts.
Covestro’s shares rose nearly 10% in Friday morning trading although they were on course to close trading with an increase of around 5%.
Apollo would be eyeing to take over Covestro’s full capital structure in a $10bn transaction, according to Bloomberg late on Thursday, citing unidentified sources familiar with the matter.
APOLLO ‘HUNTING SCHEME’
European chemicals equity analysts have said the transaction would make sense considering Apollo’s deep pockets and experience in petrochemicals acquisitions.
Following the 2008 financial crisis, Apollo acquired US major producer LyondellBasell.
Covestro, headquartered in Leverkusen, produces polycarbonates (PC) and polyurethanes (PU), among other materials.
It posted second-quarter falling sales and earnings on the back of pandemic-induced lockdowns, but analysts have said it would be one of the first companies to recover.
“Covestro would fit into Apollo’s hunting scheme – it is a producer which has known good cash flow, and earnings are at the trough so the timing would make sense,” said Baader Bank’s analyst Markus Mayer.
“Covestro has already done a lot of restructuring and are already by far more efficient than many other chemicals companies; I am not sure how much a private equity company [Apollo] could restructure further.”
However, the jump in the stock on Friday automatically made Covestro more expensive, which in the end may end up working against a potential transaction.
Warburg Research analyst Oliver Schwarz said that the takeover could “fizzle because the rumour came out too early” although he said Covestro would be still undervalued after the heavy falls in March-April.
“This is more or less a story of Apollo taking on an interesting asset that they envisage is undervalued, taking it out of the market for two-three years and bringing it back at a significantly higher price,” said Schwarz.
Covestro had not responded to a request for comment at the time of writing.
Apollo refused to comment.
A DIFFERENT TAKEOVER?
While investment funds tend to take over companies to often divide them and sell the different divisions, with short-term expectations focused on a quick return, analysts think this time round Apollo may have different intentions.
“I can see Apollo’s angle as they had a very illustrious past with regards to making a huge amount of money in acquisitions in petrochemicals, especially in polyols; however, this is not what is driving the Covestro story,” said analyst Oliver Schwarz of Warburg Research.
“LyondellBasell and Covestro are active in petrochemicals and both companies are active in PU, but that is where the resemblance really stops everything else is different.”
The pandemic has brought several headwinds to the chemicals industry, but Covestro seems to be weathering the storm well.
That makes it unlikely it would need investors to bail it out from under any financial burdens, said the analysts.
Even without taking into account Covestro’s shares jump on Friday, investors’ confidence in the firm’s stock has been gaining traction after the sharp falls in March, when the pandemic hit Europe.
The producer’s CEO Markus Steilemann has also said third-quarter financial results are tipped to be better than initial expectations.
“Covestro has made a huge run from the low point, in March where share prices were somewhere around €25/share. Now we are talking about a company that is trading almost double that price,” said Schwarz.
“This not only reflects hope of financial recovery but also a better performance in the second quarter, most likely the benefit of a tailwind of production issues led to a tight market, subsequent higher prices and inflated company margins for the short term.”
Competitors struggling with production issues in the toluene diisocyanate (TDI) market could have been a key component of Covestro’s portfolio providing buoyancy but is not the only positive indicator going forwards.
Mayer added that tailwinds could also come from restocking of polycarbonate (PC) as inventory levels in the automotive industry are relatively low.
CHANCES STILL LOW
Covestro’s recent strong performance on the stock market may even be the factor which diminishes the prospect of Apollo taking over the producer.
Mayer placed the probability of the transaction finally happening at around 30%.
“It’s not zero, but it is not at 50%. However, private Investment takes a longer view than the corporate market thinking one quarter to another so this could be a fair as a mid to long term strategy for Covestro,” said Mayer.
Covestro share price year to date
Click on image to enlarge
Source: Covestro
Front page picture: Covestro’s headquarters in Leverkusen
Source: Covestro
Focus article by Morgan Condon
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