Impact of Crude Price Fluctuation on PU Material Prices
2020-05-27    [Source:PUdaily]

    From the end of January to March, China witnessed the Spring Festival holiday, Wuhan lockdown and nationwide suspension of work due to the COVID-19 epidemic. As the world's manufacturing powerhouse and the largest oil consumer, China's oil consumption dropped sharply in the two months.

    Currently, many overseas countries are still suffering from the epidemic. Some of them or their local governments have declared a state of emergency, resulting in semi-stagnation of their economies. Since the end of January, the global demand for crude oil has dropped significantly.

    On March 6, Russia rejected OPEC's proposal to cut oil production by 1.5 million barrels per day at the OPEC+meeting. Later, Saudi Arabia decided to increase its oil production from 9.7 million barrels per day to 12 million barrels per day.

    Consequently, from March 1 to April 30 the crude price declined continuously. On April 21, the WTI crude oil price even dropped into negative territory.

Price movements from March 1 to April 30 PMDI price Price of conventional polyols WTI crude oil price

    Crude oil is used to manufacture naphtha through atmospheric and vacuum distillation, and naphtha is used to make benzene through catalytic reforming. Using phosgene process MDI manufacturers produce MDI from benzene. Thus crude oil goes through refining plant and MDI plant to become MDI.

    Crude oil is used to manufacture gas oil through atmospheric and vacuum distillation, and gas oil is used to make propylene through catalytic cracking. Propylene is oxidized to produce propylene oxide, which is used to make polyether polyols through ring-opening polymerization. Thus crude oil goes through refining plant, PO plant and polyols facility to become polyether polyols.

    The prices for PMDI and polyether polyols are determined by the costs of their raw materials as well as their supply and demand. The low crude price constitutes a drag on the prices for PMDI and polyether polyols. As for demand, markets such as refrigerators, freezers, automobiles and spray coatings remain sluggish due to the epidemic. But into May the decreased supply as a result of PMDI manufacturers shutting down their plants for maintenance gives some boost to the price.

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