Price declines continue on shaky economic outlook, ample supply
Asian TDI and MDI prices fell again during the week on the back of weak market fundamentals and against a backdrop of anxieties about a slowdown in the global economy.
According to recent economic indicators, the baseline outlook for the global economy is weaker than expected. Data released by the United States showed weak GDP growth and manufacturing activity in July. Elsewhere, in Europe, China, Taiwan and Singapore, manufacturing indicators were also surprisingly weak as well.
In China, the headline China PMI July data decreased to 50.7, marking the fourth consecutive month of decline and pointing to further growth moderation. Fighting inflation will remain the top priority for China during the second half of the year, said economists surveyed by the press, which could mean further monetary tightening as the government deems appropriate.
However, market players find a silver lining in the fact that inventory correction could be taking place so that market appetite could recover when the traditional peak season of September arrives.
Spot polymeric methyl di-p-phenylene isocyanate (PMDI)
PMDI spot prices shed $10/tonne to $1,900-1,920/tonne CFR China, reflecting lower buy-sell ideas amid subdued trades for early August shipments.
Most market participants said that spot availability was ample as most MDI facilities were still running at above-average rates, despite speculation that regional producers have cut their operating ratios to achieve more balanced market fundamentals.
During the week, a few transactions at around $1,880-1,900/tonne CFR China were heard, but those could not be traced. Industry observers said that spot discussions were still at an early stage as end-users were not in a hurry to buy, while suppliers were testing market appetite with offers ranging at $1,900-1,950/tonne CFR China.
In the domestic Chinese market, July settlement prices for PMDI cargoes in drums were heard at yuan (CNY) 16,000-16,200/tonne DEL from a local producer, marking a decline of CNY800-1,100/tonne from the previous month. For August, the list price was maintained at CNY17,000/tonne.
Other local majors quoted CNY15,700/tonne DEL for July cargoes in drums, and CNY15,200/tonne DEL for bulk cargoes, according to market sources. CNY15,000/tonne was said to be an important near-term support level that suppliers hoped would not be breached during the seasonal lull.
In southeast Asia, PMDI prices fell by $20-50/tonne to $1,930-2,000/tonne on a CFR basis, capturing deals heard concluded in the market.
Most offers were heard at $1,950-2,000/tonne CFR SE Asia, with some cargoes booked in the $1,900s/tonne CFR SE Asia for early August shipments.
However, buying ideas from a few end-users were also heard at $1,900/tonne CFR SE Asia, while other end-users withheld their bids as they preferred to monitor the situation.
In India, PMDI prices retreated $20/tonne to $1,900-2,000/tonne CIF India, reflecting a widening gap between current buy-sell ideas amid slow sales.
Spot monomeric methyl di-p-phenylene isocyanate ( MMDI)
In China, MMDI spot prices slid by $50/tonne to $2,300-2,350/tonne on a CFR basis, as players started price discussions for August. Few deals were heard as buying activity remained lethargic.
Offers were adjusted $50/tonne lower at $2,350/tonne CFR China, as there was no buying interest at higher levels, said market players.
A global producer said he managed to fix some deals at $2,350/tonne CFR China, while other negotiations were ongoing.
On the other hand, end-users in the downstream shoe soles and spandex sectors said they managed to locate lower offers at $2,250-2,300/tonne CFR China as well, although this could not be confirmed.
In the domestic market, July’s settlement price for spot MMDI cargoes in drums was sealed by a local producer at CNY20,000/tonne DEL, marking a reduction of CNY1,000/tonne from the previous month. Bulk cargoes were heard fixed at CNY19,600/tonne DEL.
Other key producers settled their bulk cargoes for July at CNY18,100-18,500/tonne DEL, said market sources.
In Taiwan, market activity was similarly slow, with offers heard at $2,350-2,370/tonne CFR Taiwan, while buying ideas were muted. Traders said that it was difficult to fix deals as end-users were not actively making enquiries, capping their buying indications at $2,300/tonne CFR Taiwan.
In southeast Asia, offers were maintained at $2,350-2,400/tonne CFR SE Asia, but bids remained scant.
Spot di-isocyanate (TDI)
Asian TDI spot prices hovered at $2,230-2,300/tonne CFR China Main Port/ Hong Kong for the second consecutive week, as the market hit an impasse between producers keen to protect their margins while buyers were anticipating further price declines.
Offers from regional producers were heard at $2,300/tonne CFR Hong Kong, with a Korean producer claiming that he managed to attain such levels with traders. Suppliers said they were holding out for the traditional peak season of September to kick in, when improved buying activity could help boost spot prices.
Nonetheless, over the longer-term, market players were doubtful that TDI prices could see a strong rebound. Much uncertainty looms ahead as to the impact of Bayer’s new TDI plant in Shanghai, which could add to the oversupply conditions prevailing in Asia.
According to China customs data, June TDI imports totalled 5,307 tonnes, marking a 38% decrease year on year, although it was 15% higher than the previous month.
Market talk emerged that regional producers were adjusting their operating rates lower to keep their inventories lean, although this could not be directly confirmed.
Some northeast-Asian traders said they were also diverting their attention to overseas markets such as Europe or the Middle East, where prices are higher. They were targeting offers at $2,300/tonne on an FOB basis.
In the domestic Chinese market, prices of spot cargoes slipped CNY100-300/tonne to CNY18,000-18,800/tonne DEL, as several local producers lowered their prices to move cargoes.
In the north, drummed TDI material were sold CNY200/tonne lower at CNY18,300-18,800/tonne DEL. In east China, cargoes shed CNY100-300/tonne to CNY18,200-18,700/tonne DEL. In south China, TDI prices (excluding VAT) were heard CNY200-300/tonne lower at CNY18,000-18,700/tonne DEL.
In southeast Asia, TDI prices fell by $20-50/tonne to $2,300-2,380/tonne CFR SE Asia this week, in line with deals and lower buy-sell ideas.
Cargoes of Korean origin were heard offered at $2,400/tonne CFR SE Asia and changing hands at $2,350/tonne CFR SE Asia in Indonesia. Importers said that local market activity is expected to diminish in the weeks leading up to the religious Eid-al-Fitr holidays, with end-users likely to resume purchases in September.
Elsewhere, lower offers were also located at $2,350-2,380/tonne CFR SE Asia, but these failed to entice end-users who were only purchasing on a necessary basis.
In Malaysia, drummed cargoes were heard sold at $2,300-2,350/tonne CFR SE Asia, depending on customer and account size.
In the Philippines, cargoes of Korean origin were heard offered at $2,350-2,380/tonne CFR, but no deal was concluded yet due to the lack of buying interest.
In Vietnam, offers were heard at around $2,350/tonne CFR SE Asia; but negotiations were underway as buying ideas were lower than $2,300/tonne CFR SE Asia.
In India, imported TDI prices slipped by $50/tonne to $2,300-2,350/tonne CIF India, capturing lower buy-sell indications amid ongoing discussions for August. Deals were limited as end-users were expecting further discounts in the near term.
Offers for cargoes of Japanese origin were heard at $2,350/tonne CIF India, while Korean cargoes were heard offered at $2,300-2,350/tonne CIF India. However, some foam manufacturers said they were hesitant in committing to purchases this week as they expect the domestic manufacturer to lower its price over the coming weekend.
The domestic price of TDI cargoes in drums stood at rupee (Rs) 122.1/kg ex-works, all taxes and duties extra, after a reduction of Rs 6/kg to on 8 July.
Contract TDI
June contract prices trimmed $150-180/tonne to $2,450-2,470/tonne CFR CMP/ Hong Kong said market sources, although regional producers declined further comments.
July prices were heard to be nominated at $2,300-2,320/tonne CFR CMP/ Hong Kong, with negotiations underway, said market sources.
For August, producers are targeting levels around $2,350/tonne CFR CMP/ Hong Kong.
Production news
South Korea’s KPX Fine Chemical is keeping its TDI facilities in Yeosu shut because of unexpected technical issues, a source close to the company said on Wednesday. The units were shut on 25 July and were supposed to resume production after one week. The company has three TDI units at the same site, each with a nameplate capacity of 50,000 tonnes/year.
China’s Shandong Yantai Juli, the sole TDI producer in Shandong province, has shut its facility on 27 July for a scheduled shutdown lasting 20 days, sources close to the company said on Wednesday. The company’s 30,000 tonne/year unit at Laiying city in Shandong province will likely be restarted around 15 August.
Production data
China’s Gansu Yinguang Chemical plans to shut its two TDI lines for a month of annual maintenance from 15 August, said market sources on Wednesday. The facilities at Baiyin, Gansu province, in northwestern China have a combined nameplate capacity of 100,000 tonnes/year.
Japan's Nippon Polyurethane (NPU) will shut its 200,000 tonne/year MDI facility at Nanyo in Yamagata prefecture for a turnaround of one month starting from mid-September, a company source said last week.
($1 = CNY6.44)
($1 = Rs44.26)
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