USES

About 80% of global consumption of methylene diphenyl diisocyanate (MDI) is in polyurethane (PU) foams, the largest outlet being rigid foams used in construction, refrigeration, packaging and insulation.

MDI is also used to make elastomers, adhesives, sealants, coatings and fibres. Other outlets are in binders (for wood, foundry cores and rubber) and in microcellular products in automotive components.

Polymeric MDI (PMDI), when combined with rigid polyols, is used in refrigerators, as well as insulation in the construction sector.

Monomeric MDI (MMDI) or pure MDI, when combined with adipic acid, butanediol (BDO) and methyl ethyl ketone (MEK), is used as a pre-polymer for applications in shoe soles, adhesives, thermoplastic polyurethane (TPU) resins, spandex and synthetic leather.

SUPLLY/DEMAND

The US MDI market experienced a period of persistent supply length in 2019 owing to slower than anticipated global economic growth and a slowdown in global manufacturing activity.

Hopes for a recovery in demand in 2020 were dashed at least through the first half of the year by the coronavirus outbreak.

The virus outbreak triggered a wave of supply chain and logistics disruptions, impacting both supply and demand for MDI while widespread quarantine measures restricted consumer spending and threatened to the tip the global economy into recession.

The MDI industry globally had been balanced to tight in the several years leading up to 2019, but has shifted to a balanced-to-long position as capacity additions have come online, even as global demand has slowed.

Longer-term trajectories for MDI and polyurethane systems demand remain positive, although average industry operating rates may remain below expectations until the global economy resumes a stronger growth trend.

PRICES

Prices and margins for both PMDI and MMDI trended lower over 2019 and the slump in demand and upstream costs early in 2020 triggered by the coronavirus outbreak suggests that prices and margins are not likely to recover until the second half of 2020 at the earliest.

Ample availability of Asian PMDI imports has kept PMDI prices under steady downward pressure since the second half of 2018. Slower economic growth and weaker upstream costs are likely to maintain downward pressure on prices over the first half of 2020.

MMDI prices shifted from a rising to a declining trend around the middle of 2019 as declining construction activity and lengthening supply started to push prices lower.

Nevertheless, MMDI continues to carry a significant premium over PMDI.

TECHNOLOGY

The main feedstock for MDI, nitrobenzene, is produced by the nitration of benzene in either a continuous or batch process. The nitrobenzene is hydrogenated to aniline, and the aniline is condensed with formaldehyde to form diphenylmethane diamine.

The polyamine is reacted with phosgene in a solvent such as monochlorobenzene to yield an isocyanate mix. The resulting mix largely corresponds to the composition of the polyamine. Pure MDI is distilled off under reduced pressure and shipped in molten or frozen form.

An MDI plant’s output is 70-80% PMDI and 20-30% MMDI. This ratio moves within a narrow range and is not easily adjustable.

OUTLOOK

MDI supply and demand dynamics may begin to move back into balance once the global economy gets back on track. Slower economic growth and declining manufacturing activity lowered demand and depressed prices in 2019 and further economic weakness touched off in early 2020 by the coronavirus outbreak are expected keep prices and margins under downward pressure.

MDI capacity expansion plans in North America are facing challenges as global demand is now expected to grow at a slower rate than had been anticipated prior to the economic slowdown in 2019.

Covestro has announced a pause in its planned expansion work at Baytown, Texas. The project would have seen the company build a new 500,000 tonne/year plant at the Baytown site by 2024, after which Covestro planned to close an older 90,000 tonnes/year line at the same location. The pause is anticipated to last for 18-24 months, after which the company will re-evaluate its expansion plans.

Wanhua Chemical has altered previous plans to build a new 400,000 tonnes/year MDI plant in Convent, Louisiana to a plan to build an MDI splitter along the US Gulf Coast. The splitter would allow Wanhua to convert crude MDI into higher value PMDI and MMDI products. This would help the company to mitigate the negative impacts of additional tariffs on Chinese MDI imposed as part of the ongoing trade dispute between China and the US.

Meanwhile, BASF is continuing with a planned expansion at its Geismar, Louisiana plant, which will double the capacity of the site from 300,000 tonnes/year to 600,000 tonnes/year between 2020 and 2023. ■