Polyol Production Outages from Tightening Government Norms on Pollution during Winter Olympics Set Stage for Supply Crisis in China

In China, the prices of Polyol were observed to be $2160/ton MW 3000 FOB Qingdao and $1965/ton MW 1700 FOB Qingdao. The continuous surge in prices seen after the major fall till 14^th Jan due to feeble demand and weak interest among the consumers due to oversupplies but the market seem to be recovering with surge in demand from downstream food industries where it is used to provide sweet taste in food and the production outage due to upcoming Winter Olympics.

On 24^th Jan, Beijing warns of heavy Air pollution during winter Olympics as it was observed that the air quality was far below World Health Organization (WHO) standards despite dramatic improvement in few years. Due to such trajectory, the Chinese Government outage the production activities of Petrochemical industries in order to reduce the index of pollution till the Winter Olympics. Government interruption due to Pollution forced the production units to operate their plant with approx. 70% rate in order to control the margin of pollution which created the supply crisis with increase in demand. Polyol demand was seeming to be recovering, but with Government Norms the prices are increasing gradually.

According to ChemAnalyst, the prices of Polyol are expected to increase as the demand is improving the supply demand dynamics can alter the market. Feedstock TDI and MDI prices are also expected to increase due to low operating production rate and demand from downstream food and adhesive industries. However, the situation will be more likely to recover after the Winter Olympics as the Government interruption will reduce and the production units can operate accordingly. Natural Gas and crude oil prices are also expected to increase in the upcoming weeks.