CICC: Optimistic about TDI continuing to increase in price, leading enterprises have a certain price influence.

CICC released a research report stating that currently, the concentration of the global and domestic TDI industry is high, leading companies have a certain price influence, and it is expected that the concentration of the global TDI industry will continue to increase in 2025-26. In 2024, the TDI production capacity utilization rate was 84%, with both exports and apparent consumption increasing year-on-year. Benefiting from the policy drive for home renovation and automotive industries, it is expected that domestic TDI demand will continue to rise in 2025. At the same time, current inventory levels are low, and it is expected that TDI prices will continue to rise. CICC's main points are as follows: High concentration in the global and domestic TDI industry Currently, the main TDI production companies in China are Wanhua Chemical Group, Covestro, BASF, Cangzhou Dahua, and Gansu Yinguang, with a total TDI production capacity of 1.57 million tons, of which Wanhua Chemical Group's domestic TDI production capacity is 800,000 tons, accounting for 51% of the total domestic TDI production capacity. From a global perspective, the concentration of the TDI industry is also high, with the TDI production capacities of Wanhua Chemical Group, Covestro, and BASF accounting for 72% of the global total capacity in 2024. We estimate that the main new TDI production capacity globally in 2025 will be Wanhua Chemical Group's second phase project in Fujian with a capacity of 360,000 tons/year. In addition, Mitsubishi Chemical's TDI capacity will be reduced to 50,000 tons in July 2025. It is expected that the concentration of the global TDI industry will continue to increase in 2025-26. In 2024, the TDI production capacity utilization rate was 84%, with both exports and apparent consumption increasing year-on-year In 2024, China's TDI production reached 1.32 million tons, a year-on-year increase of 13.4%, with a high capacity utilization rate of 84%. From January to November 2024, China's TDI exports amounted to 326,000 tons, a year-on-year increase of 5.3%. From January to November 2024, China's apparent consumption of TDI was 898,000 tons, a year-on-year increase of 6%. The "Notice on Strengthening Large-Scale Equipment Renewal and Implementing the Policy of Replacing Old Products with New Ones in 2025" proposes proactive support for home improvement consumer products, including increasing subsidies for individuals purchasing items and materials for old house renovations, kitchen and bathroom renovations, and home aging upgrades. Benefiting from the policy drive for home renovation and automotive industries, it is expected that domestic TDI demand will continue to rise in 2025. Profitability and inventory levels are currently low, and TDI prices have recently increased In 2024, due to weak downstream demand and domestic TDI companies increasing their capacity through technological upgrades, TDI prices decreased. In the third quarter of 2024, the price difference between TDI and raw materials reached a historical low, with some TDI companies operating at a small loss. According to Sublime China Information data, both social and corporate inventories of TDI in China are low. With the rise in prices of raw materials such as toluene driving the recent increase in TDI prices, the current TDI market price in East China is 13,700 yuan/ton, a 6.6% increase in the past week. Due to the high concentration in the TDI industry, leading companies have a certain influence on prices, and with current low inventory levels and demand benefiting from support for the policy drive for replacing old products with new ones, it is expected that TDI prices will continue to rise. Valuation and recommendation It is expected that TDI prices will continue to rise, and we are optimistic about Wanhua Chemical Group (600309.SH), with related companies including Cangzhou Dahua (600230.SH). Risk Warning: TDI demand is lower than expected, and raw material prices increase significantly.