MDI producers near theoretical capaicty Peter Huntsman in Q2 2017

The Woodlands, Texas – Higher prices for MDI in the second quarter were offset by lower volumes, Huntsman said in late July.

Peter Huntsman, CEO, said the increase in his firm's Polyurethanes segment for the three months ended June 30, compared to the 2016 period was primarily due to higher average selling prices offset by lower sales volumes. The firm put the rising price of MDI down to ‘higher raw material costs and strong market conditions.’

In the second quarter of 2017 sales in Polyurethanes were up 5% on the 2016 quarter at $1bn, while EBITDA was down 2%, compared with the 2016 quarter, to $167 m.

Over the first half of 2017, Polyurethanes sales were $1.98 bn compared with $1.81 bn in the first half of 2106. EBITDA was $311m in the first half of 2017 compared with $302m in the equivalent 2016 half. In local currencies, Huntsman said that prices for polyurethanes were up 15% in the second quarter and 13% in the first half.

Peter Huntsman said in the second quarter his MDI business ‘recorded EBITDA of $165m up $13m on the same period in 2016, in spite of a $15m planed turnaround at Rotterdam.’

This takes place once every four years and hit MDI performance in the first half by $20 m, he added. Capacity constraints in Europe have capped capacity growth potential, he added. If the maintenance activities had been excluded, then the European business could have seen 4% growth. Huntsman said the 600 kT/year debottlenecking project in Rotterdam should be complete by the end of the year.

In the US, quarter on quarter growth was 7% driven by higher volumes in composite wood products, and the downstream differentiated consumer businesses.

‘During the second quarter, we moved closer to completing mechanical construction of our MDI joint venture faculty in Caojing, China. That will be ready to be commissioned by the end of the year,’ Peter Huntsman said, adding ‘we expect commercial operations during the first quarter of 2018.’

This should contribute around $85m/year to EBITDA, he said.

In response to an analyst’s question he said: ‘We certainly are starting to bump up against capacity constraints. If we had the volume we’d be able to sell it into the market place.’

Huntsman is also trying to move more of its MDI into the ‘formulation and downstream systems houses as aggressively as we can,’ he continued. ‘I’d like to see three-quarters of it, if not more, going downstream because I would much prefer to have an 18%-plus EBITDA margin business that’s growing consistently. Roughly 25% of our EBITDA comes though smaller bolt-on acquisitions that take our MDI, move it downstream.’ His firm recently bought the UK's IFS, and Tecnoelastomeri, which had a strong polyurethanes systems business.

Peter Huntsman, said that the MDI market is likely to be ‘snug’ for the next several years. He put plant utilisation ‘in the high 80%s around 90%s. I imagine in Europe is in the mid-to-high 90%s.’ He added that the level is roughly the same in the Americas and slightly lower in Asia, based on the amount of MDI it is possible to produce.

The full Huntsman q2 2017 analysts conference call transcript is available on Seeking Alpha.