Uses

The main outlet for toluene di-isocyanate (TDI) is in the manufacture of polyurethane (PU) flexible foams used in upholstery, mattresses and automotive seats. This is achieved by reacting the TDI with a polyol to produce the foam. Smaller uses for TDI include polyurethane elastomers and coatings. TDI occurs as colourless to pale yellow liquid or crystals with a pungent odour. All isocyanates are hazardous and must be handled with care. Skin contact must be avoided, as redness, blistering and possible sensitisation can result.

Supply/demand

TDI demand in 2018 was generally lower in the second half of the year. End users switched to alternative downstream materials after price increases in 2017 and 2018. As a result, the market experienced dampened TDI consumption year on year for the rest of 2018. Market participants said that ensuing price decreases would lead to order book volumes eventually rising. But, this did not occur by the end of 2018 and sources were unclear as to when demand could return.

Supply did lengthen in response to this limited purchasing interest. Additionally, the restart of BASF’s 300,000 tonne/year Ludwigshafen plant in July 2018 also led to higher availability. The German seller initially took the plant offline in January in order to install a new reactor. Participants said that the facility’s eventual return would create structural oversupply in the market. In the third as well as fourth quarter many commented that there was an ample amount of product available.

BASF did halt production at its Ludwigshafen plant again in November 2018. The German manufacturer announced that low river Rhine water levels and subsequent difficulties in securing raw materials led to its decision. This outage was not enough to balance length in the market in December completely, but it did reduce supply to some extent.

Prices

TDI prices reached historic highs at the start of 2018 as a tight market drove discussions. BASF’s Ludwigshafen outage from January to July was the main driver behind this lack of product.

After repeated increases until May, prices then flattened out before softening, as demand began to lower and supply began to lengthen. The prior firmer pricing trend led end users to switch to competing downstream products, which limited TDI consumption.

BASF’s Ludwigshafen plant restart in July added to this downward pressure with pricing dropping by triple digits in multiple months afterwards as supply lengthened further. By the end of 2018, prices were still not at a historical low in spite of this constant softening.

Many sources consequently commented that there was still room for more downward pressure. Although, participants disagreed over whether buyers’ or suppliers’ margins were sufficiently wide enough in late 2018.

Technology

The main route is the nitration of toluene to dinitrotoluene, followed by catalytic hydrogenation to toluene diamine (TDA), which is dissolved in an inert solvent and reacted with phosgene to produce a crude TDI solution. TDI can also theoretically be produced directly from dinitrotoluene by liquid phase carbonylation with o-dichlorobenzene.

Germany’s Bayer MaterialScience (now Covestro) developed a route that carries out phosgenation in the gas rather than the liquid phase. It started a 30,000 tonne/year pilot plant in 2004. The technology was first commercialised at its world-scale 250,000 tonne/year TDI plant in Shanghai, China and it has also used technology in its new 300,000 tonne/year TDI plant in Dormagen, Germany, which came onstream in late 2014.

Outlook

Buyers are aware that the European TDI market has become consolidated since producers previously closed plants globally due to worldwide oversupply. There are sources that subsequently expect more volatility in the market as fewer facilities are left running in Europe.

The downward price trend in 2018 contributed to such concerns and has opened up the significance of raw material toluene costs. In 2018, toluene pricing was mostly absent from TDI negotiations. Nonetheless, it could figure in negotiations again if sellers’ margins continue to narrow.

Furthermore, oversupply on a global level is likely, especially as Chinese seller Wanhua Chemical started up its 300,000 tonne/ year Yantai plant at the end of 2018. There was high availability in the European market before the Yantai start up. So, there will potentially be a greater abundance of product globally.

Demand may offset any jump in availability. However, 2018 consumption was lower year on year after an upward price trend in the European market. Market participants expect that order book volumes will rise again following lower prices, but this is yet to occur.