Robert Peacock aromatics consultant, ICIS outlined how the price reporting and consultancy company sees the supply side of the key raw materials, MDI and TDI developing in the coming years and how upstream price movements have influenced the price of isocyanates.
MDI will see overcapacity, but this will quickly be absorbed by a market that is growing at around 5%/year worldwide. TDI producers are likely to see their margins squeezed in the medium term, he warned.
Peacock illustrated his talk by referring to a global operating rate, which, as he explained “doesn’t refer to any specific plant or region.”
Taking MDI first, he said, “we expect a drop in operating rates over the next couple of years caused by the new capacity coming on stream in Saudi Arabia.
“However the good growth demand for MDI is expected to continue for the next few years. The extra capacity is expected to be taken up very quickly,” he said, adding that MDI producers should be “back up to average operating rates within a short time frame.”
Peacock said, “Around 2mT/year extra capacity is expected to come on stream by 2019.”
He added that “50% of this is in Asia, 25% in the Middle East. All of this is brand-new, integrated capacity. There are also plans for debottlenecking plants in the US and Europe.
Peacock said, ”We also expect there to be further rationalisation of existing and older units. This has already started in Asia with some of the older plants in Japan earmarked for closure.”
Turning to total demand for both P MDI and M MDI, he said, “the Northeast Asian market is the largest market by a good way with 40% of global demand. We believe there will be continued growth in this region” and that it will “increase the share of the market over the next five years.” He estimated that by 2019 it may reach 47% of global production.
“Currently the Americas and Europe account for 50% of the market however this share will be squeezed in the next few years by other regions which are expected to show high demand growth.
“In summary we see growth in the global market for MDI at an average of over 5%/year; growth in the Northeast Asian market is expected to average over 7%. Even in Europe and the Americas growth above GDP is expected,” he told delegates.
Turning to TDI
The volumes involved in the TDI market are “somewhat smaller than in the MDI market,” Peacock said.
“Again we expect a reduction in global average operating rates due to new world-scale plants in Europe alongside new capacity in China and Saudi Arabia.
“All of these are expected to be fully on stream in the next couple of years, he added.
Peacock warned that “The impact of this additional capacity on the TDI market is far more marked than on the MDI market, mainly due to the respective sizes of the units involved. TDI is likely to grow from about 1.9m tonne in 2013 to around 2.2 m tonne in 2019.