New York - The North American and European markets for MDI-based polyurethanes are going to be tight over the next two years and Huntsman will be buying MDI in the merchant market this year, said Peter Huntsman, chief executive officer of Huntsman Corp. speaking at Goldman Sachs Basic Materials Conference.
Speaking on May 22, Peter Huntsman said his firm "is really in a sold-out position. By the end of this year, we'll be actually buying products from our competitors in order to meet our own customer demands."
Huntsman's business is being driven by the housing market. Huntsman is seeing an upside for polyurethane materials in housing because polyurethane systems have substituted for a number of other materials, such as formaldehyde. In 2013 Peter Huntsman said he expected volumes sold into the housing market to be about the same as they were in 2006 when there were around 2 million homes built. In 2013 there are likely to be between 900,000 and 900, 500 produced.
Across the polyurethanes segment of his company, Peter Huntsman says the20 year trend growth of about 7% to 8.5% per year is continuing. He said that much of this has been due to the explosion in use in Asia over the past 10 years. He said Asia is now the "largest single market for consuming MDI. Asia is overtaking Europe and North America". Asia is also growing faster than those traditional areas.
This is translating into capacity utilisation. Peter Huntsman said his firm estimates that MDI production is operating at around 80% of capacity at the moment. For Huntsman this means the business will have a strong uplift on margins and the overall bottom line and Huntsman is sold out.
There will be more Huntsman capacity in China, Peter Huntsman confirmed but put the time frame for this as sometime before the end of 2017. The company is waiting for environmental permits on its planned expansions there. However, Peter Huntsman added that if all of the proposed capacity in China were to come on-stream in the next five years then the industry would still be operating at around 80-90% of capacity because the market for MDI is growing so quickly.
He added: "All this capacity is coming on in China. This is a globally traded product when it's in its most commoditized crude form. But when you get into the downstream derivatives, where Huntsman competes and produces most of the product, we believe that, if anything, the products, over the course of the next not just a year or 2 but for the next 3 to 5 years, are going to be fairly tight in the European market and particularly in North America as the housing recovery continues to take speed."
Peter Huntsman said his firm is continuing with strategic acquisitions, smaller acquisitions, bolt-on acquisitions in Polyurethanes and expanding capacity, and moving the business more into systems and formulations.
He added: "We're taking -- not necessarily adding a great deal of MDI to the market but taking MDI that we have and being able to derivatize that into more formulated products, more systems, more areas where we can have multiple price points, multiple customers and so forth and a wider variety of grades."
Huntsman hopes that this strategy will help his firm get back to the margins/tonne that it enjoyed at the last economic peak.
Read the full transcript at Seeking Alpha