Uses

About 80% of the global consumption of methylene diphenyl diisocyanate (MDI) is used in polyurethane (PU) foams. The largest outlet is in rigid foams used in construction, refrigeration, packaging and insulation. MDI is also used to make binders, elastomers, adhesives, sealants, coatings and fibres. Other outlets include binders and microcellular products.

Supply/demand

Asia MDI demand comes from various downstream sectors, such as thermopolyurethane resins and insulation panels.

Supply for MDI in the Asian market tightened significantly when unforeseen outages brought about by the polar storms in the US Gulf Coast in mid-February cut US-origin cargo availability. With numerous key producers affected, Asia’s cargo availability was also compromised as regional sellers grappled with increased buying appetite from not only within Asia but also from other areas like Europe.

Unexpected shutdowns brought about by technical woes in the Middle East also contributed to the supply crunch during March and the earlier part of April.

On the demand front, cargo uptake in Asia slowed in late January amid Lunar New Year festivities, before restocking activity was observed.

Buyers’ appetite remained mostly stable, until price hikes in the related rigid foam polyols sector amid upstream gains led to growing production cost pressure for MDI buyers. This eventually impacted confidence among buyers, who expressed concern over difficulties in translating heightened costs to end-users.

Demand in India took a heavy hit from late April when parts of the country were placed under lockdown upon the widespread resurgence of COVID-19. Trade was brought almost to a standstill, leading to subdued markets.

Prices

Spot prices of polymeric MDI (PMDI) saw limited fluctuation from the beginning of the year as the Asian market was largely subdued amid the Lunar New Year holidays.

In mid-February, spot prices in Asia spiked significantly on the back of a supply crunch following outages in the US Gulf Coast caused by polar storms. Restocking activity among some market players after the holidays, on top of panic buying among buyers due to concerns over cargo availability buoyed spot pricing.

Prices continued rising steadily until late March, when production at some facilities gradually resumed, leading to increased availability. Waning demand amid higher production costs brought about by firm polyols pricing weighed spot prices down, leading to declines in April.

The closely related monomeric MDI (MMDI) market observed similar trends during the same time period.

In the Chinese domestic market, yuan prices for both PMDI and MMDI also fell from late March on the back of waning demand after a prolonged period of firm pricing. Amid heightened production costs brought about by polyols price hikes, some buyers and distributors opted to liquidate their existing stocks in order to reduce the risks of losses. With cargoes being offered lower than other mainstream producers, prices in China soon fell.

Technology

MDI is made primarily from nitrobenzene, which is produced by the nitration of benzene in a continuous or batch process. Nitrobenzene is then hydrogenated to aniline, which is condensed with formaldehyde to form diphenylmethane diamine. This is reacted with phosgene in solvent to yield an isocyanate mixture, and then pure MDI is distilled under reduced pressure. The market split is roughly 80% polymeric - 20% pure MDI to 70% polymeric - 30% pure MDI, according to market sources.

Outlook

The PMDI and MMDI markets are unlikely to see increases in regional supply due to limited plans for expansion for the rest of 2021. Supply should mostly be stable.

Buying appetite among MDI users still hinges on downstream performance in sectors such as the industrial, refrigeration and footwear. Also, regional rigid foam polyols price trends will determine production costs for downstream makers, and potentially impact buyers’ confidence in purchasing MDI.

COVID-19 continues to loom over the market as a threat. With the significant resurgence in India in April, demand was severely impacted, leading trade to come to a standstill. Most market participants are expected to maintain a cautious approach towards procurement, especially since manpower is also affected.

Restrictions placed on shipping and cargo flights to and from India are expected to weigh heavily on near-term demand from the country and might also push regional sellers to seek alternative destinations to sell their material. ■