China PU Market Reset: War Premium Fades, Demand Pressure Builds

June 5, 2026 7 min read

The Middle East crisis reshaped global polyurethane feedstock trade flows in a short period of time. Low-cost Middle Eastern supply became less available, European producers faced higher cost pressure and reduced competitiveness in import markets, North American markets experienced feedstock tightness and price increases, while South Korea and Japan also faced upstream and logistics constraints before gradually moving back toward some stability. During this disruption, China’s PU feedstock supply became even more important for import-dependent markets globally.

By early June, however, the market has entered a new phase. The war premium that pushed TDI, PMDI and Polyether Polyols prices higher in March and April has largely faded. China domestic prices have corrected sharply, with TDI already back near February levels, PMDI moving quickly toward its pre-crisis range, and flexible slabstock polyol already at February levels. Some war-related factors have not fully disappeared, logistics costs remain elevated, recent 20ft container indications are still around USD 3,000–4,000, and shipment delays or uncertainty may persist in June as there has been no clear ceasefire or peace agreement signed. Even so, pricing is now being driven more by weak domestic demand in China, soft overseas downstream demand, healthy inventories in export markets, production costs, operating rates and margin discipline than by supply panic.

This makes China’s current price reset especially important. As the world’s largest and most influential PU feedstock supplier, China’s domestic price movement is now a key signal for regional and global import markets. The central question is no longer whether the crisis pushed prices higher, it already did. The more important question is whether demand recovery and inventory digestion can stabilize prices before producer margins come under deeper pressure.

Price Reset Toward Pre-Crisis Levels

The price correction in May and early June has been significant across all three major PU feedstocks. TDI has already returned to around February levels. PMDI remains slightly above its February average, but the pace of decline suggests that it may also approach the pre-crisis range soon. Flexible slabstock polyol has already reached February levels, with margins becoming extremely tight for some suppliers.

China PU Feedstock Price Trend and Reset | 5 Feb – 5 June (CNY/Tonne)

Note: Prices mentioned are East China DEL domestic prices, including 13% VAT; TDI/PMDI on drum basis, flexible slabstock polyol on bulk basis. USD equivalents use the June 5 exchange rate: 1 USD = 6.77 CNY.

TDI: Back to February, Still Under Pressure

TDI has already returned to around February price levels. Current China domestic TDI prices are around CNY 14,300–14,900/MT (USD 2,110–2,200/MT). Production cost is estimated at CNY 12,000–12,200/MT (USD 1,770–1,800/MT), leaving current margins around CNY 2,500–2,700/MT (USD 370–400/MT).

Normally, a return to February levels would suggest that the crisis impact has largely disappeared from pricing. However, TDI prices are still under pressure because demand has not recovered strongly. China exported large TDI volumes during the crisis period, especially when overseas buyers were trying to secure supply amid uncertainty. Those shipments helped import markets, but they also created healthier inventory positions downstream. As a result, many buyers are now less aggressive in May and early June.

The key issue is that prices are no longer falling because of the crisis; they are falling because demand remains weak. If downstream consumption does not improve, TDI margins may continue to compress in the near term. Stabilization may only become more likely in the second half of June, when inventory levels begin to decline and July shipment demand becomes clearer.

PMDI: Fast Correction, Higher Cost Base

PMDI is also correcting sharply, although it has not fully returned to February levels yet. The current average price is around CNY 15,650/MT (USD 2,310/MT), compared with a February average of about CNY 14,200/MT (USD 2,095/MT). Based on the recent decline of around CNY 1,000/MT per week, PMDI could move closer to the pre-crisis range if the current trend continues.

The important difference is cost. Current PMDI production cost is around CNY 12,150/MT (USD 1,795/MT), compared with about CNY 10,430/MT (USD 1,540/MT) in February. This means the market price is moving back toward pre-crisis levels, but the cost base remains higher than before. Current margins are still around CNY 3,500–4,000/MT (USD 520–590/MT), but continued price correction could reduce this buffer quickly.

This makes PMDI a transition market. The war-driven price premium is fading, but production economics are not fully back to February conditions. If demand remains weak and buyers continue to delay procurement, prices may keep moving lower. However, the higher cost base may eventually slow the decline, especially if producers become more disciplined on offers and operating rates.

Polyether Polyols: Tight Margins Limit Further Downside

Flexible slabstock polyol in domestic market has already returned to around February levels, with the current bulk price averaging about CNY 8,350/MT (USD 1,235/MT). Unlike TDI and PMDI, the polyol market has very limited room for further downside because margins are already extremely tight. Some suppliers are close to breakeven, while others may already be facing losses depending on feedstock costs and plant efficiency.

The weakness is mainly demand-driven, but export economics are also adding pressure. The cancellation of Polyether Polyols export tax rebate has tightened export profit margins, keeping export offers relatively firmer than February levels even as domestic offers have already returned to pre-war levels. This gap is making overseas buyers more cautious, especially when many downstream users are still digesting March–April cargoes.

Large export volumes in March and April helped overseas markets build inventory, especially when buyers were reacting to the risk of prolonged supply disruption and policy-related cost changes. Demand is unlikely to recover strongly before late June unless inventories fall faster than expected. Suppliers are already operating at reduced rates, with current operating rates around 50% in some cases. If demand remains weak, further production cuts may become more important than additional price reductions. For Polyether Polyols, the market adjustment is likely to shift from price competition to supply discipline.

Export Inventory and Weak Demand Pressure

The March–April export wave is now one of the main reasons why the market remains weak even after prices have returned close to pre-crisis levels. China exported large volumes of PU feedstocks during the two-month crisis period, including 132,770 MT of TDI, 170,964 MT of PMDI and 611,818 MT of Polyether Polyols. These volumes mainly flowed into major consuming regions such as Southeast Asia, South Asia, South America, Turkey, Europe and Africa, where buyers had moved earlier to secure supply amid uncertainty over Middle East availability, logistics delays and rising prices.

This export data only reflects China’s shipments. In reality, many of these same consuming markets also imported from other available regions, including South Korea, Thailand, Singapore, Europe and other suppliers where material was available. Taken together, China’s strong export flow and additional regional sourcing helped downstream buyers build healthier inventories during March and April. That inventory position is now one of the key reasons why May–June demand has weakened: buyers are not absent, but many are covered, cautious and waiting for clearer price signals before restocking.

Freight remains higher than normal and shipment uncertainty still matters for importers, but these factors are no longer strong enough to offset weak demand pressure. Domestic demand in China is also not strong enough to absorb supply quickly, while overseas downstream buyers are still digesting inventory. As a result, both domestic and export offers remain under pressure, and the market is increasingly being driven by inventory digestion rather than supply panic.

China PU Feedstock Exports | March–April (Unit: Tonnes)

Source: China Customs

What Comes Next: Demand Recovery or Further Market Pressure?

The near-term direction depends on whether demand recovery can catch up with the pace of price correction. For TDI, prices are already back near February levels, but weak demand could still squeeze margins further in early to mid-June. For PMDI, prices may continue moving toward the pre-war range, but higher production costs could eventually limit the depth of the correction. For Polyether Polyols, further price downside appears limited because margins are already very tight.

The second half of June will be an important turning point. If downstream inventories decline and July shipment demand improves, prices may begin to stabilize. If demand remains weak, producers may need to manage the market through lower operating rates rather than deeper price cuts, especially in Polyether Polyols and eventually in Isocyanates if margins continue to compress.

Overall, China’s PU feedstock market has moved from crisis-driven price inflation to demand-driven price correction. The war premium has largely faded, although elevated freight, shipment delays and geopolitical uncertainty still remain secondary risk factors. The next stage will be defined mainly by domestic demand weakness, export-market inventory digestion, downstream restocking, production cost pressure and producer discipline. China remains the key supply signal, and its price reset will continue to shape regional PU feedstock pricing in near to medium term.

https://www.pudaily.com/news/65022/china-pu-market-reset-war-premium-fades-demand-pressure-builds