Southeast Asia TDI Supply and Demand Market

There are no TDI production in Southeast Asia, and all locally consumed TDI products are imported. The main import source countries are China, Japan, and South Korea, with small amounts imported from the Middle East and India. The major suppliers are Wanhua Chemical from China, Mitsui from Japan, Hanwha from South Korea, BASF and OCI. In addition, a small portion of TDI from Sadara in the Middle East is also imported, which is sold by Dow and Sabic.

The total consumption of TDI in Southeast Asia is expected to be around 210,000 tons for the whole year of 2023, up 7.7% year-on-year from 2022.

Major downstream industries of TDI in Southeast Asia

Upholstered Furniture

Upholstered furniture is the most important TDI downstream industry in Southeast Asia, accounting for more than 70% of TDI consumption.

Among the Southeast Asian countries, Vietnam's furniture industry has the most prominent development. In 2020, Vietnam exported $7.4 billion of furniture to the U.S., up 31% from 2019, while China exported $7.33 billion of furniture to the U.S. during the same period, down 25% from 2019. Vietnam surpassed China as the largest market for furniture exports to the US.

However, low economic growth rates due to geopolitical factors and epidemics have led to a gradual slowdown in demand for furniture in Southeast Asia since 2022. According to a report by the Organization for Economic Co-operation and Development (OECD), Vietnam's economy is expected to maintain a growth rate of 6.6% in 2023 and 2024, continuing to lead the top five economies in Southeast Asia. The Philippines, Indonesia, Malaysia, and Thailand also show relatively stable growth trends. Vietnam and Indonesia have been leading the furniture market in Southeast Asia. Notably, Vietnam overtook China as the largest exporter of furniture to the United States in 2022, with its furniture exports to the United States growing by 7 percent to nearly $9.7 billion, while China's exports declined by 7 percent to about $8.5 billion, dropping its market share to 28 percent. However, 2023 will be challenging for Vietnamese furniture companies as they face difficulties in exporting due to falling demand in major markets such as the US, the EU, Japan, the UK, and South Korea. A report by the Ministry of Forestry of Vietnam showed that the export value of Vietnam's forest products in the first half of 2023 declined by 29 percent year-on-year, of which the export value of furniture products was down by xx percent year-on-year. Many Vietnamese furniture manufacturers have had to cut back on the scale of their operations and are facing operational difficulties, with some reporting a 25 to 30 percent decline in their business. However, despite a series of challenges facing the furniture market in Southeast Asia, the countries are still showing different economic vitality and potential growth opportunities.

Automotive

Southeast Asia's automotive industry shows a narrow downward trend in 2023: The low base effect of Southeast Asia's automotive production in 2021 triggered a significant surge in value in 2022. Southeast Asia's automotive production returns to a steady level in 2023, expected to reach 4,323,000 units, a year-on-year decline of 1.4%. Thailand, Indonesia, and Malaysia are the leading automobile producers in Southeast Asia, accounting for 90% of total production.

China's growing relationship with ASEAN countries is driving the growth of Chinese automobiles in the Southeast Asian market: as of the first half of 2023, China's imports and exports with ASEAN amounted to 3.08 trillion yuan, up 5.4% year-on-year, accounting for 15.3% of China's total imports and exports. China-ASEAN economic and trade relations have become increasingly close, with China-ASEAN FTA 3.0 negotiations successfully taking place in Thailand, while the Regional Comprehensive Economic Partnership (RCEP) came into force on June 2, 2023, fully implemented for the 15 signatories. Overall, ASEAN countries are not only an important part of the Chinese market, but also a key target for automotive companies to internationalize and expand their overseas markets. Several Chinese automotive companies have been rapidly laying out their business through vehicle exports, KD mode, and building factories in the Southeast Asian market, with China's automotive exports to ASEAN growing by 48% and accounting for 26% of total ASEAN automotive imports in 2022 alone. The share of Chinese auto brands in the ASEAN market has climbed from less than 1% to more than 6% over the past five years. In addition, Thailand plans to allocate 40 billion baht for new energy vehicle purchase subsidies from 2023 to 2025, while the implementation of Malaysia's tax exemption policy for electric vehicle purchases will further boost the growth of Chinese new energy vehicles in the Southeast Asian market.