The Urethane Blog

TDI Overview

The Difference between Trading Market in China and Overseas Countries

2017-09-28    [Source:PUdaily]

PUdaily, Shanghai–1. Global TDI production capacity
Globally, the production and supply of TDI is relatively centralized because of technical barriers. As far as supply is concerned, the world’s existing annual capacity of TDI stands at about 3 million tons, and the bulk of the plants are concentrated in Asia, Europe and Americas. With an annual capacity of about 1.78 million tons, Asia has three major countries supplying TDI, including China, Japan and South Korea. With an annual capacity of around 850,000 tons, Europe has its TDI production concentrated in Germany and Hungary. And with an annual capacity of about 388,000 tons, Americas has its TDI supply concentrated in the U.S.. It can be seen that Asia currently ranks first in terms of supplying TDI, and is also one of the regions with the most brisk TDI trade in the world.

2. The Difference between Trading Market in China and Overseas Countries
There are some differences between the trading market in China and overseas countries. TDI trades in China include trades between manufacturers and downstream customers, manufacturers and distributors, distributors and traders, middlemen and downstream customers, etc. China’s monthly TDI consumption stands at about 50,000 tons. On a 30-day basis for a month, the average daily consumption is about 1,660 tons. If half of the 1,660 tons of TDI are sold through distribution channels, 2 or more transactions will be involved in the process, resulting in an average daily consumption of about 2,500 tons. The frequent and complex transactions, as well as the opaque market have to some extent led to the wild price fluctuations and great change in the market. Therefore, in China, we make offers and enquiries, conduct negotiations and sell off on a daily basis, and each day may see different prices.

However, the TDI market in dollar terms is much steadier than that in yuan terms. In dollar-terms TDI markets in central and east Africa, Americas and Asia (excluding China), etc., major TDI manufacturers make offers mostly once a month. For example, in Japan and South Korea, the manufacturers mostly make offer for October shipment in late September or early October. At the beginning of each month, the middlemen or downstream customers in each region will determine whether to take the offer or not. The transaction is largely completed in the first half of the month, and everyone mainly waits for the offer for the next month during the second half. The price usually sees little change in the second half of the month unless the market surges or falls sharply. So when PUdaily makes inquiries of overseas local TDI traders about the market quotation in the second half of the month, the answer is always “we have to wait until 25 to get new offers. The transaction has been finished in the first half of the month”. In Europe, the market volatility is much lower due to the introduction of the distributor system, in which the prices are adjusted every six months, as per market source. Therefore, China’s TDI middlemen may be the most tired compared with their counterparts in other countries. They need to keep an eye everyday on the changes in the market, the dynamics of the manufacturers as well as the news from all directions.

3. Recent situations of the dollar-terms TDI market
When it comes to the current dollar-terms market, most of the markets are now similar to that in China: with the suppression of high prices, downstream customers have sluggish demand, which in turn leads to lower prices, except for the strong U.S. and Indian markets.

The strong market in United States is due to the fact that the hurricane affected some TDI production and thus the supply got tight. As a result, we heard the news that Dow would increase TDI price by 265 USD/ton in October, and BASF would raise the price by 260 USD/ton on October 1. As for the Indian market, it sees strong uptrend thanks to the Diwali. GNFC, the only TDI manufacturer in the country, has made several attempts to raise the price to 315 rupee/kg (4,543 USD/ton).

As for dollar-terms markets in Asia, Middle East and Africa, TDI was mostly traded between 4,300 and 4,400 USD/ton in early September. Some manufacturers raised the price to 4500-4,600 USD/ton, but downstream customers showed little willingness to accept it. Later, Hanwha Chemical and OCI lower new offers, with the price dropping back to 4,300 USD/ton CIF Africa. Amid downside trend in domestic TDI market, the Chinese manufacturers now again restart to export TDI to overseas market, with an offer of about 4,300 USD/ton FOB in drum. As overseas supply increases, plus the prices are already high, PUdaily expect that the prices of overseas TDI in dollar terms may follow the steps of China’s TDI market and see further decline in October.