Uses

Toluene di-isocyanate (TDI) is used in flexible polyurethane (PU) foam, which has outlets in upholstery, mattresses and automotive seats. Other uses include rigid foams and adhesives, paints, concrete sealers and as a crosslinking agent for nylon 6 and intermediates in PU coatings and elastomers.

Supply/demand

The TDI market has shifted dramatically from a period of persistent tightness in 2017 and early 2018 to one of persistent oversupply from the second half of 2018 into 2019.

BASF resumed full operation at its new 300,000 tonne/year plant in Ludwigshafen, Germany in 2018 while Wanhua started up a new 300,000 tonne/year plant in China in late 2018.

Both plants are world-scale facilities with nameplate capacities equal to approximately 10% of total global demand.

While supply levels have been rising, TDI consumption growth has fallen below expectations. Some end users shifted from polyurethane foams to alternative materials during the 2017 price run-up. Some new mattress technologies such as “bed-in-a-box” mattresses are using monomeric methylene diphenyl diisocyanate (MMDI) in their formulations in place of TDI, displacing some demand from the furniture and bedding sector.

Indications that the global economy may be heading into a recession are also weighing on TDI consumption figures, with the automotive industry being particularly hard-hit.

The US is a net exporter of TDI, with the bulk of exports moving to Canada, Mexico and South America.

Prices

The rise in prices during 2017 caused by persistent supply tightness has reversed itself in recent months, with prices posting consecutive declines throughout the second half of 2018 and into the first half of 2019.

Supply will be structurally long globally until demand growth rises to meet the significant capacity additions seen in the past few years, which is likely to keep prices under downward pressure. The risk of a global recession is also likely to slow rates of TDI demand growth and keep the market well supplied, maintaining downward pressure on prices.

Some attempts to raise prices have emerged as producers move to recoup lost margins.

Second-quarter results for major global TDI producers showed considerable year-on-year declines in net profits, spurring producers to attempt to limit further margin erosion.

Technology

TDI has two isomers: 2,4-TDI and 2,6-TDI. The most common form of TDI offered commercially is an 80/20 mixture of the 2,4- and 2,6-isomers, but it is also available as a 65/35 mixture and as a pure 2,4-isomer.

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 be produced directly from dinitrotoluene by liquid phase carbonylation with o-dichlorobenzene.

Covestro developed a route that carries out phosgenation in the gas rather than the liquid phase. The technology was already commercialised at its world-scale 250,000 tonne/year TDI plant in Shanghai, China. Covestro has also been running a 30,000 tonne/year pilot plant since 2004 and is thought to have used this technology in its 300,000 tonne/year TDI plant in Dormagen, Germany.

Outlook

TDI prices are not likely to post major changes over the coming months. Supply and demand fundamentals suggest that prices will face ongoing downward pressure over the medium term, although compressed producer margins may limit any further price decreases.

The possibility that the global economy may tip into recession will be the main factor likely to drag prices below current levels, especially if weaker growth rates pull down crude oil prices.

TDI producers will also need to contend with potential loss of market share to MDI-based foams and to non-foam applications.

MDI demand growth is anticipated to remain ahead of TDI demand growth in the coming years, with MDI expected to gradually gain market share at the expense of TDI.

Lower prices for polyurethane foams during a period of improved isocyanate availability may help to regain market share from non-foam applications.

The strong insulation properties enjoyed by polyurethane foams gives polyurethanes an advantage over other materials in a macroeconomic environment in which improving energy efficiency is a key goal both to meet consumer demand and to stay compliant with regulations.