Although producers tried to raise notations for polyurethane feedstocks once more before the end of the quarter, the rather ambitious targets they had set themselves at the beginning of the month were more or less ignored. In fact, scuffles over market share actually saw the prices of TDI and polyols slipping slightly. In the case of polymeric MDI, on the other hand, producers managed to net increases of EUR 60/t, about a quarter of their original calls. The premium surcharge for the pure grades rose almost in parallel by EUR 50/t. TDI, by contrast, followed the decline in the cost of the feedstock, dropping by EUR 50/t. The downward trend was also evident with flexible polyols, which dropped by EUR 35/t. The August notations for the rigid grades, on the other hand, were carried over into September.

The available volumes of PU feedstocks were generally sufficient to meet demand in a timely fashion. In some cases, shortages of polymeric MDI resulted in delivery delays. Flexible polyols were in abundant supply and there were sufficient quantities of the rigid material to meet the demand for insulation applications.

Talking to Plasteurope.com, most market players described demand as normal for the season. Still, some segments have not yet fully recovered following the end of the summer holidays. Orders for flexible polyols for the automotive sector, for example, used in particular for mid-size vehicles, continue to be weak.

At the beginning of the new quarter, producers will likely renew their calls for price increases for MDI and polyols. However, in view of seasonal fluctuations and the slower business recorded in some segments, it will depend largely on producers’ market discipline whether they succeed in factoring in the increases. In the case of TDI, constantly falling feedstock costs have triggered a downward trend that will probably be very difficult to stop.

Nippon Polyurethane's MDI production in Nanyo / Japan has ceased for maintenance, which will not be completed until some time in October.

The annual servicing of Yantai Wanhua's MDI facilities in Yantai / China will take place during the entire month of October. In addition, the start-up of the company's MDI line in Ningbo, originally scheduled for November, has been delayed until January 2011.

The MDI plants operated by Bayer MaterialScience (BMS) and Huntsman in Caojing / China, are also down for maintenance.

Change September against August: Up EUR 50-60/t
The mixture of poor availability, an increase in demand from companies returning from the holidays and a rise in the cost of benzene (up EUR 35/t) at the end of August raised the upward pressure on MDI notations considerably. One producer responded by calling for an “immediate” increase of EUR 200/t in the first few days of September, already setting the tone for price developments in the last month of Q3. In fact, polymeric grades for the production of insulation material rose by an average of EUR 60/t, with important customers billed around 5% below those of medium-sized ones. The goal of widening the gap between the benzene contract price and the MDI range to pre-crisis levels, however, fell short of around EUR 100/t. The pure grades followed the notations for insulation material, but were somewhat behind at EUR 50/t. In Asia, Chinese prices peaked at around 1,900/t due to scaled-down production, while prices generally rolled over from August in North and South America.

Supply: Tight (polymeric) to balanced (pure). In Europe, four producers carried out annual maintenance at their MDI plants. At the same time, two other players reported irregular output caused by technical problems. Nonetheless, suppliers were generally able to cope with demand, which was down slightly on August’s levels.

Demand: Normal to good. Ordering activity for insulation material based on polymeric MDI slowed down as the month progressed, with buyers put off by the high prices and the need to avoid building up any stocks before the end of the quarter.

Outlook for October: Producers seem to be of one opinion when it comes to the topic of how prices will fare in the final quarter of this year. Most of them told Plasteurope.com that they are aiming for a price level hovering around the EUR 2,000/t mark. Although the scheduled annual maintenance in western Europe has in most cases been completed or is about to come to an end, plants are resuming normal operations only gradually. Despite the fact that producers have no stocks to fall back on, consolidated western European output for building insulation applications should suffice to meet demand more or less on time. The same is true of the availability of pure MDI. So far, producers have only received half the monthly quota of orders for the last month of Q4. Due to the uncertainties of the weather, order cycles are being shortened and volumes reduced. In turn, the resultant weakening of demand could torpedo producers' intentions to push through further increases. On the other hand, the consistently high production figures for utility vehicles and the revival in the footwear industry could see MDI prices rising in Q4.

Change September against August: Down EUR 50/t
In September, the toluene contract in western Europe declined by an average of EUR 15/t, yet TDI notations slumped by as much as EUR 50/t. Over Q3 as a whole, however, producers have gained a small margin improvement, conceding price reductions of around EUR 95/t while their feedstock costs fell by EUR 107/t in the same period.

Supply: Good. European supplies of TDI improved considerably in the wake of the numerous completed maintenance turnarounds and following an end to many of the unplanned outages of the last few months. Output was back to normal nearly everywhere, and producers were able to satisfy demand without delay.

Demand: Normal to weak. After the wave of demand seen in previous months, automotive orders for TDI used in the production of car seats fell significantly. The high-volume upholstered furniture business has not yet managed to pull itself out of its low-season rut. Manufacturers of high-grade mattresses, by contrast, have seen much livelier ordering activity since the summer lull.

Outlook for October: Given that toluene spot market prices have not changed very much in the last month of Q3, the final quarter is likely to start off quietly and with a stable cost basis. By the time this report was written, producers had not submitted any price announcements – presumably for that reason. Absent any unexpected incidents, TDI output should be largely unrestricted, also because in view of the stagnating demand, the tendency is towards a surplus. On the demand side, orders from both the automotive and the furniture sectors have slowed down considerably, and only higher-quality mattresses are showing an increase in orders. Even if the cost base remains unchanged, the downward trend could well continue.

Change September against August: Unchanged to down EUR 35/t
One producer’s call for an extra EUR 200/t at the beginning of the month was doomed from the start. The goal of topping the annual reference prices of the “fat” years before the end of Q3 was simply unrealistic. In fact, the opposite happened. Producers of flexible polyols found themselves having to concede an average of EUR 35/t, and it was only stronger demand from the insulation segment was able to prevent the same thing from happening with the rigid material, where August’s prices mostly rolled over. With the exception of Asia, where production outages kept prices moving up rather than down, the situation remain unchanged elsewhere in the world – including in North America, the Middle East and Africa. Nevertheless, Q3 still turned out to be worthwhile where producers are concerned. Not only did their overall feedstock purchases become cheaper, with propylene (C3) down EUR 70/t and styrene (SM) down EUR 62/t. Added to their accumulated price increases of EUR 35/t for the flexible grades and EUR 50/t for the rigid grades over the same period, the margin situation looks very bright indeed.

Supply: Balanced (rigid) to good (flexible). Most production plants were operating at full throttle and able to meet demand without any problem.

Demand: Normal to weak. In view of the ongoing drop in the price of the main cost factor propylene (C3), converters of the flexible grade continued to hold back on their ordering activity. Buyers of rigid material for the building sector were also somewhat more reluctant in their ordering activity, preferring to reduce stocks in the hope of falling prices.

Outlook for October: Producers are sticking to their original calls for an extra EUR 200/t, which their customers had ignored completely when first launched at the beginning of Q3. They will also cling to their goal of improving margins in the final quarter of the year. The ongoing spot market price negotiations for the main cost factors C3 and SM show that prices have stopped falling. In order to meet demand, most polyol production facilities are working normally again, but the fact that many converters are taking their time in submitting orders, hoping for a price cut, is inevitably leading to a swelling – albeit minimal – of producers' inventories. Orders from the flexible polyols segment mix are still stagnating at their low, pre-holiday level. There are few signs of business picking up either for material used to produce seats in mid-sized cars or for the less expensive mattress segment. This tendency towards a surplus could easily prompt market scuffles. Orders from the construction sector are also based on uncertain weather predictions. If producers still wish to sell their planned volumes, they will have to adopt a more flexible approach. Thus, the possibility of significant concessions should not be excluded.

Prices Isocyanates / Polyols (EUR/t)
Material	September			August 2010
MDI polymeric	1,700	-	1,850	1,680	-	1,750
MDI pure	1,830	-	1,950	1,800	-	1,880
TDI	2,100	-	2,250	2,170	-	2,280
Polyols flexible	1,600	-	1,700	1,620	-	1,750
Polyole rigid	1,750	-	1,850	1,750	-	1,850
Data without guarantee. Compiled: 20 September 2010

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