Just as isocyanates started to see a light at the end of the tunnel after months of weakness, COVID-19 arrived and dampened any hope of growth. However, demand is growing, and markets are beginning to stabilise in most regions.
US MDI markets usually see an uptick in demand as spring arrives but as Q2 comes to an end it is very clear this is an unusual year. Markets softened in the spring and there is talk of producers lowering operating rates due to lack of demand. Most sectors which shut down in April have now begun to get back to business as usual but at lower levels as demand slowly starts to gather some strength. The construction sector is reported to be better than expected and is increasing, albeit at lower levels. Demand from automotive is slow but is expected to gather pace soon.
The European MDI market was not dissimilar and only returned to some sort of normality in June. Overall market sentiment is improving as businesses resumed production, albeit at lower levels due to social distance measures. Demand has been declining significantly since April abut June saw better than expected demand and July is looking promising. Construction, which is usually strong at this time of the year, continues to grow and levels are very healthy. Demand for pure MDI has seen a bigger decline due to weakness in the automotive market. This sector has also resumed production, but it will be a very slow process to get things up and running again. Automotive markets take time to readjust and the sector was already under pressure before the pandemic started.
In China, the MDI market started to recover around April/ May, but demand has been below normal levels. Several maintenance turnarounds took place in June and some regions saw prices going up as a result. As international markets started to reopen, export levels improved in May adding to further upward pressure on prices.
The North American TDI market weakened due to the ongoing COVID-19 pandemic. Demand is still at low levels as markets slowly restart operations. Demand from downstream sectors has been affected at high levels. The automotive and comfort sectors started a staggered restart from May Automotive performed better in May but is still well below previous levels. April was completely shuttered. TDI, which goes into construction, is doing well as the sector is providing a small lifeline to players. TDI into comfort is doing well as the sector started to rebound around June.
The European TDI market was severely affected by the COVID-19 epidemic but by June the sector saw significant improvement. Demand from automotive is still behind but foam plants are reopened and doing well. Automotive was already weak before the epidemic as the sector is under pressure to change to be more environmentally friendly. Shops have reopened and demand for comfort products could see further improvements as customers start to go back to shops.
In China, the domestic TDI market firmed under the strong drive from suppliers to increase prices. Despite the Labour Day holiday, most downstream buyers had filled their warehouses when TDI was at a low price. Major producers showed strong determination to push the price up. By mid-month, BASF and Covestro went into maintenance turnarounds and major producers continued to increase their listing prices. Demand remained low and some traders lowered their prices to get sales.
The North American domestic polyether polyol market is still weak due to the pandemic. Domestic demand has changed significantly over the last few weeks. Demand is beginning to see some improvement, depending on the sector. The construction sector is seeing better activity levels, but levels are still low. The automotive sectors were better in May compared to April but are still at low levels. Demand from the comfort industry depends on the reopening of retail facilities and quarantine measures being eased.
The European polyether polyols market is reported to be improving after closures since April due to the COVID-19 outbreak. Like MDI and TDI, polyether polyols sentiment is better as economies start to reopen businesses and demand is picking up. Moving forward, plants in the automotive markets restarted production in May for most European countries. Those serving the comfort industries, which were closed during the pandemic, also restarted, and are operating around 80%.
The Chinese flexible foam polyol market showed signs of improvement. The Labour Day holiday triggered demand all the way to the foam market. Feedstock PO was in short supply and helped to support prices.
Most markets are expected to see further demand improvement, but some regions will do better than others. In Europe, markets usually slow down in August due to the summer holidays but it seems this year there is an appetite to keep going. The US is still being heavily impacted by COVID-19 and any improvement will depend on how the epidemic plays out. Asian markets are stable to soft depending on the sector. Some markets are off season and demand is low. This trend is likely to continue in the short term.