gist
High overseas costs may cause supply constraints, and MDI exports are expected to improve. As of June 17, 2022, aggregated MDI closed at 18,200 yuan/ton, at 58.1% of the historical price, down 10.78% year-to-date; pure MDI closed at 21,500 yuan/ton, at 55.9% of the historical price , up 3.4% year-to-date. Although the growth rate of MDI exports has slowed down in the short term, domestic MDI production using coal as the main energy source has considerable cost advantages compared to overseas MDI production using natural gas as the main energy source. Constrained by raw materials and energy sources, force majeure incidents occurred frequently in overseas MDI installations, and MDI prices in Europe and the United States continued to rise. In the context of the epidemic, my country’s aggregated MDI exports have not declined significantly. According to Baichuan Yingfu data, domestic aggregated MDI exports from January to May 2022 will be about 439,200 tons, down 3.6% from the same period last year. At present, domestic manufacturers have resumed work, and export transportation has gradually resumed. With the impact of exchange rate, the domestic MDI export volume is expected to improve.
In the next few years, the growth rate of global MDI supply may be lower than that of demand. From the observation of historical data, the price of MDI is dominated by the supply and demand pattern for a long time, and it is significantly pushed up by the force majeure news in the short term, and the price rise or fall cycle lasts about 2-3 years. This round of price upward cycle starts from about July 2020, mainly due to the limited increase in production capacity due to the recovery of demand after the epidemic. Force majeure factors such as extreme weather and epidemic affect the operating rate of equipment and also have a certain catalytic effect on prices. Optimism about the MDI boom in the market outlook is mainly based on the following reasons: 1) The supply-side increment of MDI in 2022 is limited, Wanhua Chemical’s new production capacity in Fujian is expected to be put into operation by the end of 2022, and the new production capacity in Ningbo may not be gradually put into operation until 2023. International manufacturers expand production projects It will be gradually launched after 2024. 2) There is a lot of rigid demand for MDI downstream, and it is less affected by the epidemic. The new version of building energy conservation standards will continue to expand the application of MDI in the field of building insulation materials. The promotion of formaldehyde-free boards is also expected to stimulate domestic demand for MDI, and the growth rate of overall demand is expected to exceed the increase in supply. speed. According to Covestro data, the global MDI supply in 2021 is about 9.2 million tons, with a CAGR of 4% in 2021-2026; the global MDI demand is about 8.23 million tons, with a CAGR of 6% in 2021-2026.
The upside of TDI is even more impressive. As of June 17, 2022, TDI (East China) closed at 17,200 yuan/ton, at the 31.1% quantile of the historical price, with a year-to-date increase of 12.1%. Compared with MDI, the current price of TDI is still at a historically low level. The historical price trend and periodicity of TDI are similar to those of MDI, but the fluctuation is more obvious, or it may be related to the instability of TDI production equipment. Although the global TDI production capacity is relatively excess, in 2021, TDI equipment at home and abroad will be affected to varying degrees by extreme weather, raw material supply and technical failures, and the actual output will be lower than expected. In mid-2022, there are many TDI manufacturers overhauling expectations, and TDI supply will remain tight.
Wanhua Chemical’s growth is better than that of international competitors, fully benefiting from the recovery of the MDI boom. Benefiting from the steady expansion of MDI and the successive increase in the volume of petrochemical and new materials sectors, Wanhua Chemical’s performance growth in recent years has been significantly higher than that of international competitors. In 2021, Wanhua Chemical’s operating revenue will grow by 98.2% year-on-year, while the year-on-year growth rate of BASF/Huntsman/Covestro’s revenue will be 32.9%/40.5%/48.5%, respectively. Under the background of high performance growth, Wanhua Chemical’s capital expenditure has not slowed down. In the past two years, the main increase in global MDI production capacity is still from Wanhua Chemical, and the scale advantage will be further consolidated. At the same time, according to our calculations, under the current coal and natural gas prices, assuming that the energy demand comes from external coal mining or natural gas, the MDI production cost advantage of coal as the main energy source exceeds 7,000 yuan/ton. As energy prices continue to rise, the advantages of integration are increasingly valued by polyurethane manufacturers. Wanhua Chemical and BASF, which have petrochemical industry chains, have certain cost advantages. International manufacturers such as Covestro and Huntsman have promoted integrated cost reduction plans. .
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