Will TDI Price Go up after Chinese Spring Festival?
2018-02-28    [Source:PUdaily]
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PUdaily, Shanghai--In the last two days, China's TDI market has entered a new period, during which major manufacturers announced price increases, ranging from 500 to 1,000 RMB Yuan/ton. The price increase will undoubtedly have great impact on TDI market. Today, PUdaily will sort out the overall market situation for you.

1. Announcements about TDI price adjustment in the last two days
(1). On Sunday (25 February), Covestro Shanghai announced its new fixed offer for TDI of 39,800 RMB Yuan/ton, increasing by 1,000 RMB Yuan/ton from the previous one.

(2). BASF Shanghai announced its settlement price for February shipment of 38,800 RMB Yuan/ton, up 200 RMB Yuan/ton from last month. It also announced the list price for March shipment of 46,000 RMB Yuan/ton (in drum), rising 1,000 RMB Yuan/ton from February. The operation of its 160,000 tons/year facilities remains stable.

(3). Cangzhou Dahua announced new fixed offer for TDI of 39,000 RMB Yuan/ton DEL, up 500 RMB Yuan/ton from previous one. The operation of its 150,000 tons/year facilities remains normal.

(4). Yinguang Chemical’s two TDI production lines began to undergo in-rotation turnaround last weekend. Currently, it has only one line in production, with a low inventory. Its new fixed offer for TDI rose to 39,000 RMB Yuan/ton.

Before the Spring Festival, the TDI price remained high due to tight domestic supply. During the festival, manufacturers were active in production as they received enough orders prior to the festival. Some of them even receive order for 25 February. This resulted in low inventory levels, which is the main reason why the manufacturers raised their prices. Another reason is these manufacturers attempt to facilitate the selling of their products by increasing prices in the context that downstream customers stocked limited inventory before the festival and took a wait-and-see attitude toward the future market.

2. Analysis of TDI manufacturers in China
As for manufacturers in Shanghai, Covestro raised its fixed offer for TDI by 1,000 RMB Yuan/ton, making it the first manufacturer to announce price increase after the festival. This also reflects its inadequate supply. In fact, news on the production problem of its TDI facilities began to be heard in late December. But whether the facilities have resumed normal operation remains unknown. Some people say that its problem has been solved. Whereas others hold opposite opinion. But they all agree that its TDI supply will be limited in the first quarter and even the first half of the year.

BASF Shanghai’s TDI facilities were hit by a production failure on January 11, leading to a sudden tightening of its supply, and it announced that it would halve its supply to major distributors and dealers in February, which constitutes another important factor contributing to the high TDI price. According to market sources, the manufacturer's production had returned to normal before the festival. But its supply is expected to remain tight in March at a reduced level (about 80% of the normal supply). In addition, in late January, BASF Germany shut down and overhauled its new TDI plant in preparation for the installation of the new reactor. Thus, the manufacturer’s facilities in China and South Korea as the major sources for its global supply may transfer goods to meet global demands. This may explain why BASF reduced supply at home.

As for indigenous manufacturers like Cangzhou Dahua and Yantai Juli, all of them saw normal production before and after the Spring Festival other than some manufacturers that occasionally experienced small problems and performed maintenance. As a result, the current supply from indigenous producers is relatively sufficient.

3. Analysis of Japanese and Korean manufacturers
On the whole, the supply of four major TDI manufacturers in Japan and South Korea will be tight in March and April. BASF South Korea has released its offer for March shipment at USD 4,700/ton, up 200-300/ton compared with February. Hanwha Chemical has received order for the end of March, and OCI has sold out goods for March shipment. The two manufacturers’ offers for Asian shipment are heard at 4,700-4,750 USD/ton (37,386 RMB Yuan/ton). In terms of manufacturers in Japan, MCNS (formerly known as Mitsubishi) has received order for late March. But its supply will remain tight due to the maintenance plan in May and June.

Japan and South Korea saw strained domestic supply for two reasons. On the one hand, as TDI is in short supply worldwide, manufacturers began to receive orders for February and March in January. On the other hand, BASF South Korea and Hanwha Chemical reduced their production load at the beginning of February (affected by short supply of CO). And Hanwha even issued a rare notice about delay in shipment. This incident to some extent further exacerbated the short supply in Japan and South Korea.

4. Analysis of downstream demand
As for China market, this week downstream manufacturers began to enter into operation, but full operation will not be seen until the Lantern Festival (Mar. 3rd). They had limited inventory before the Spring Festival. However, as the TDI price currently remains high and their profits are meager, downstream customers’desire for replenishment may be affected. So it is expected that they will continue to make purchase based on their rigid demand.

As for foreign market, downstream manufacturers there are sensitive to price increases. Some Asian distributors reported a significant slowdown in selling at high price, and that some downstream manufacturers were daunted by the high price of 4,700 USD/ton offered by South Korean producers. Some small and medium-sized manufacturers had to receive fewer foam orders or reduce other costs owing to inadequate inventory and high cost.

5. Price forecast for the first half of the year
In the first half of the year, the global TDI price is expected to remain high for a period of time due to short supply. And the Chinese market will not be an exception. A favorable factor is that the new reactor (the reactor will arrive in early March) will be installed for BASF’s 300,000 ton/year TDI facilities in the second quarter of this year. If it can resume normal production as planned in the second quarter, the scarcity of goods will be alleviated to a certain extent and enable the TDI price to return to a reasonable level.

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