Mideast, Africa TDI to extend falls on low Asia/Europe offers

By Ong Sheau Ling

SINGAPORE (ICIS)–Toluene di-isocyanate (TDI) prices in the Middle East and Africa are likely to continue falling with lower offers coming from Asian and European producers that are trying to find an outlet for their excess cargoes, industry sources said on Wednesday.

A northeast Asia-based producer, which is facing inventory pressure, was heard undercutting the offers of other European and Asian producers, quoting $2,450/tonne (€1,739.50/tonne) CFR (cost & freight) for TDI to the Middle East and Africa on 11 July, market sources said.

Early this week, the majority of European material was offered at $2,650-2,700/tonne CFR Africa/Middle East, while the bulk of the Asian products were offered at $2,550-2,600/tonne CFR Africa/Middle East for July/early August shipments, down by $100/tonne from last week, industry sources added.

These producers are unwilling to go lower than their current offer levels, which is close to their manufacture costs.

Despite this, traders said that producers will likely reduce their offers eventually, even if they make a loss.

“They have to find other outlets to relieve their high stock levels,” a northeast Asian trader said.

“These suppliers will either eventually drop their offers to match the $2,450/tonne CFR [Middle East/Africa] price level or they will cut their operating rates to minimise their margin loss and a continuous build up in stocks,” a European trader active in selling to Africa said.

As a result, purchasing sentiment in the Middle East and Africa is soft, as buyers anticipate a further downslide in TDI prices, tracking the softer levels not just in China, but also Europe. Buying ideas have so far been capped at $2,450/tonne CFR Africa/Middle East this week.

“Although there are many offers in the market, there are no takers. No one is confident that the current price levels [are] sustainable, especially as the festive season is coming soon,” a Dubai-based trader said.

Demand in the Middle East has already started to dwindle ahead of the Muslim fasting season of Ramadan, which starts on 1 August. Demand is expected to remain low until Eid-ul-fitr is over on 30 August, local players said.

Trading activity in northern Africa has also been slow, alongside with the lacklustre economic performance because of the ongoing political turmoil.

Meanwhile, Asia is currently facing a situation of oversupply because of a lacklustre downstream foam market in the key China market.

In China, spot TDI prices were discussed at the mid to high $2,300s/tonne CFR China Main Port (CMP)/Hong Kong on 13 July, down about $50/tonne from last week.

July TDI contract prices were reported on early July at a wide range between €1,950-2,050/tonne FD (free delivered) NWE (northwest Europe), representing a decrease of €40-80/tonne from June, according to ICIS.

There is still a surplus of supply in the China and Europe markets because of forthcoming plant expansions and start ups amid dull downstream market conditions.

In Europe, Hungarian TDI producer BorsodChem started trial operations at its new 160,000 tonne/year facility at the beginning of the month.

In China, Bayer Material Science started up its 250,000 tonne/year TDI plant this month, while Cangzhou Dahua Chemical will restart operations at its 50,000 tonne/year TDI unit later this month after a turnaround, market players said.

Cangzhou Dahua is also starting up a 70,000 tonne/year TDI plant in late September.

Yantai Juli, another TDI producer in China, is on schedule to start up a 45,000 tonne/year unit by the end of this year.

($1 = €0.71)

Plants starting up in H2 2011 in China and Europe:

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