Overseas giants stopped production due to force majeure, causing a current gap in supply and demand of MDI and a sharp increase in prices. Why are domestic prices not rising but instead falling?

Finance Associated Press May 24th (Reporter Fang Yanbo)-Global supply tightened suddenly and international market prices rose in response, but domestic prices fell instead of rising. Recently, the differentiated trends in domestic and international MDI markets have attracted investors' attention. A reporter from the Finance Associated Press learned from the industry chain that this week, the American subsidiary of Covestro officially issued a force majeure notice, imposing supply restrictions on all MDI series products in North America, covering polymer MDI, pure MDI, and modified MDI across all categories, affecting all end-use markets such as building insulation, automobile manufacturing, and household appliances; at the same time, Dow Chemical's MDI plant is also constrained by insufficient supply of carbon monoxide and chlorine gas raw materials. "Combining with the earlier maintenance of Huntsman's Louisiana Geismar MDI plant, the affected MDI plants in North America, due to force majeure, raw material constraints, and maintenance factors, account for a total capacity of over 1.1 million tons, nearly 70% of the total MDI capacity in the United States," a chemical product trader told the Finance Associated Press reporter. In fact, prior to the announcement of the force majeure, the market had already reacted to the tight supply of MDI in North America due to factors such as raw materials. The above-mentioned individual introduced that at the end of April, Covestro had announced a $600 per ton increase in the price of global MDI products, and Tosoh of Japan also raised the prices of MDI series products by more than 80 yen/kg starting from May, equivalent to about $500 per ton. After the force majeure was triggered, the spot prices of MDI in North America even experienced a single-day surge of 500-800 US dollars per ton. However, just as overseas supply tensions were escalating, the domestic MDI market not only did not follow suit but continued to decline, showing a significant "temperature difference" compared to the foreign market. According to data from Longzhong Information, as of this Friday, the price of domestic polymer MDI in Shandong was around 18,200 yuan/ton, and the price of domestic pure MDI was around 23,100 yuan/ton, down by 500 yuan/ton and 100 yuan/ton respectively from the previous day. In the view of industry insiders, the divergence in market trends is mainly due to the transmission of downstream supply and demand with international trade. The above-mentioned individual stated that the MDI market is currently experiencing the traditional peak season of Golden March and Silver April, with cooling industry demand beginning to weaken, and reduced operating rates in industries such as TPU and coatings directly reducing the purchasing power for pure MDI. Limited release of end-user orders, downstream factories mainly adopting a wait-and-see attitude, only maintaining small-scale purchases for immediate needs, unwilling to build up inventory, resulting in a subdued market transaction atmosphere. "More importantly, due to issues such as tariffs, the North American market currently cannot directly bridge the supply gap with Chinese products, relying more on sources from Europe and other regions in Asia, while Chinese products need to wait for the emergence of demand gaps in the European or Asia-Pacific markets, which also takes time," the above-mentioned individual further explained. It should be noted that although the MDI market has been relatively quiet recently, production companies still maintain a high level of profitability. According to calculations by Longzhong Information, based on reference raw material and product prices, the theoretical production profit of large-scale polymer MDI plants has reached 4,500 yuan/ton in the past three months, an increase of nearly 50% from the average in the first quarter. This article is reprinted from "Finance Associated Press," GMTEight Editor: Song Zhiying.