Which direction for PU Raw materials in 2017?

The global polyurethane industry faced substantial challenges in 2016 related to key feedstock toluene diisocyanate (TDI). The question preoccupying TDI buyers currently is how long will the upward trend in TDI pricing continue, and when will the market return to more sustainable pricing?

TDI supply was impacted by a series of production problems, the most significant and the longest lasting being the delay in the start up of BASF’s new 300 ktpa TDI plant in Ludwigshafen. The plant has been beset with a variety of technical issues, and in January 2017, the plant remains down. Whilst starting up a TDI plant can be a notoriously tricky process, the delay has been exceptionally long, and as a result of this issue, combined with several other production problems at other global producers, TDI prices have rocketed in all regions. The start-up of Sadara’s new 200 ktpa TDI plant in Al Jubail, Saudi Arabia later this year, is likely to help ease the situation, but the key factor is how long will it take for BASF to solve its production problems.

Conversely, 1,4-butanediol (BDO) producers have suffered the opposite problem, with pricing falling globally until the fourth quarter 2016. A vast oversupply of BDO and derivatives in China, driven by a series of new plants coming on stream, sent global prices into a tailspin. At the same time, the stellar demand growth for derivatives such as spandex moderated, and Chinese BDO producers were left with unsustainable margins. Recent improvements in the state of the Chinese market have boosted prices in other regions, and the market now seems to have bottomed out. Early 2017 has seen prices inch upwards across the world, and producers are optimistic that the situation will continue to improve. A key factor will be whether the recovery seen in recent months in the Chinese market can be sustained.

Growth in the global PU industry remains promising as the product’s versatility and notable properties continue to support steady growth in a raft of applications. In its various guises, polyurethane is a key raw material in the construction, automotive, refrigeration, furniture and footwear sectors. One area which has grown considerably in recent years is PIR/PUR insulation which is one of the most effective insulation materials and is supported by governmental energy reduction policies. Another key growth area is spandex driven by the Asian market where the majority of production is now located. Overall, polyurethane promises ongoing growth opportunities worldwide, and the Chinese market continues to offer the strongest pace of growth.

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Rachel Uctas
Senior Consultant – Polyurethanes & Intermediates, 1,4-Butanediol & Derivatives
Phone: +44 207 924 3955

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