After the restart of BASF's TDI plant in Ludwigshafen, Germany, the market will shift from persistent supply tensions to overcapacity and lower operating interest rates, and global prices may fall further.
The 300,000-ton-a-year plant was originally planned to start up in 2016, but due to a series of technical problems, it has not been fully restarted until now.
The global TDI market has been relying on the start of this plant, combined with Saudi Arabia's Sadara Company's annual production capacity of 200,000 tons, to balance the supply and demand after other facilities closed in 2014-16.
However, the start-up of BASF and Sadala was delayed, and a series of other shutdowns and force majeure events exacerbated market tensions, causing TDI prices to soar and the gap between the price of raw toluene and widening. Beginning in June, prices are beginning to fall as BASF is expected to restart.
It is reported that the BASF plant accounts for about 10% of the global TDI capacity of about 3 million tons per year.
The spike in TDI prices was caused by a large number of parkings and force majeure, particularly affecting the Middle East. TDI supply was also restricted as the plant shut down in 2014-16. The situation has not improved since the BASF and Sadara factories have not been started. If BASF's load increases to 80% or more and sales are 2 to 3 months, prices in Europe and the Middle East will face downward pressure. Any significant output at the Sadara plant will have an impact on the Middle East market.
influences
With the new capacity put into operation and other parking is coming to an end. Before 2022, no new TDI capacity is expected to increase, and by 2021, growing demand will increase operating rates.
The TDI market is very stable, with the top five manufacturers controlling more than 70% of the market. BASF and its German counterpart Covestro are the world's two largest producers.
Last Friday, Martin Brudemuller, CEO of BASF, said: "TDI has seen a special situation in the past year and a half and will now return to normal. We have a large supply worldwide and of course we have to adjust our transaction volume . "
The company's chief financial officer, Hans-Ulrich Engel, added: "The business of isocyanates will have to be normalized, but the rise cycle will be longer than expected. But we see that … the (margin) of Asian TDI may Will normalize. "
Covestro, which has a global market share of 30%, achieved a profit of USD 500 million due to the extremely tight TDI market in 2017.
This is expected to continue until BASF starts work to normalize the market.
On July 26, Covestro announced the growth of the second quarter of this year. Although there are signs that the high prices of some polyurethane products have begun to normalize, the company raised its 2018 performance expectations to above the 2017 level.
Covestro said: "At present, there are signs that market prices are normalizing in some product areas, especially the soft foam precursor TDI."
From 2017, high TDI and MDI profit margins increased EBITDA by 70.6% year-on-year to 3.4 billion euros. From the performance of the first six months of 2018, Covestro said that this year may exceed last year.