The restart of the BASF Ludwigshafen TDI plant will have an impact on the market

After the re-launch of the TDI plant in BASF’s Ludwigshafen, Germany, the market will shift from continued supply tension to overcapacity and lower operating rates, and global prices may fall further.

The 300,000-tonne plant was originally planned to start in 2016, but due to a series of technical problems, it has only been fully restarted until now.

The global TDI market has been dependent on the start of the plant, plus Saudi Arabia’s Sadara’s annual capacity of 200,000 tons to balance supply and demand after the closure of other facilities in 2014-16.

However, the driving of BASF and Sadara was postponed, and a series of other shutdowns and force majeure incidents exacerbated market tensions, resulting in soaring TDI prices and widening the price gap between raw materials and toluene. Starting in June, prices are starting to fall as BASF is expected to restart.

It is reported that the BASF plant accounts for about 10% of the global TDI capacity of about 3 million tons per year.

The soaring price of TDI was caused by a large amount of parking and force majeure, especially affecting the Middle East. The TDI supply was also limited by the factory’s parking in 2014-16. The situation has not improved as the factories in BASF and Sadara have not started. If BASF’s load increases to 80% or more, sales in Europe and the Middle East will face downward pressure for 2-3 months. If the Sadara plant has any large output, it will have an impact on the Middle East market.

As new capacity goes into production and other parking is coming to an end. Before 2022, no new TDI capacity is expected to increase, and by 2021, increasing demand will increase the operating rate.

The TDI market is very stable and the top five producers control more than 70% of the market. BASF and its peers, Covestro, are the two largest producers in the world.

Last Friday, BASF’s CEO, Martin Brudemuller, said: “TDI has seen a special situation in the past year and a half and will now return to normal. We have a large supply around the world, of course we have to adjust our trading volume. .”

Hans-Ulrich Engel, the company’s chief financial officer, added: “The isocyanate business will have to be normalized, but its up cycle is longer than expected. But we see… Asian TDI (margin) may be in the next month normalization.”

With a 30% global market share, Covestro has achieved a profit of US$500 million due to the extremely tight TDI market in 2017.

This is expected to continue until BASF starts to normalize the market.

On July 26, Covestro announced its growth in the second quarter of this year. Although there are signs that the high price of some polyurethane products has begun to normalize, the company has raised its 2018 performance forecast to above 2017.

Covestro said: “There are indications that the market price in some product areas is normalizing, especially the soft foam precursor TDI.”

Since 2017, high TDI and MDI margins have increased EBITDA for that year by 70.6% to 3.4 billion euros. From the performance of the first six months of 2018, Covestro said that this year may exceed last year.

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