Rise in MDI Prices in Europe Amid Weak Production Levels

The Methylene Diphenyl Diisocyanate (MDI) price trend inclined in the second half of September 2024 and suppliers in Europe raised the quotations by 0.8% during the month.  The MDI demand was consistent in the international market and the supply availability was moderately low due to weak production rates.  Europe's PMI Output Index for Germany declined for the fourth consecutive month in September, marking the lowest since February. This reading indicates a significant contraction in overall output for goods and services. The manufacturing sector's decline intensified, with goods production experiencing its sharpest drop in a year.  At the same time, the supply disruptions included temporary maintenance at major MDI plants in key Asian MDI producers in China, and fluctuating raw material costs, with weak cost support impacting the MDI prices impacting the MDI market in Europe. However, the demand for MDI was stable among domestic buyers amid the weak consumption of polyurethane materials in the construction and automotive sectors.

Previously, the MDI production rates were hampered amid the low availability of feedstock supplies and intermediate operational rates due to labor deficits in the region during regional summer holidays. Simultaneously, concerns about a potential recession in the US have influenced the international crude oil market and refinery operations, resulting in a shortage of feedstock Benzene and Aniline, leading to persistently low production rates of MDI.

Meanwhile, buyers cautiously made their purchases as the Consumer Price Index (CPI) for the Euro Area rose by 1.8% in August 2024, from July, reflecting a continued upward trend in consumer prices. The demand for MDI was average in the polyurethane segment due to the moderate consumption of materials in the construction sector. The construction activity declined across all monitored countries and sectors in Europe, with reduced employment and purchases. The latest construction PMI survey indicated a significant slump in eurozone construction by the end of Q3 2024, highlighted by a steep drop in new orders since May. While supply chain performance improved and input cost pressures remained modest, expectations for the future remained pessimistic. The HCOB Eurozone Construction PMI Total Activity Index rose slightly from 41.4 to 42.9, indicating a softer contraction and extending the decline in activity to 29 months across the three largest eurozone economies.

At the end of September 2024, MDI Polymeric Grade FD Hamburg prices hovered at USD 2560/MT. As per the estimation, the MDI prices would decrease in Europe with the beginning of the final quarter of 2024. The recent end of disputes in Libya and the resumed exports from the country will negatively impact the feedstock Benzene prices and upstream cost support on production costs of MDI. Additionally, as per reports, Covestro will supply Carlisle Construction Materials with Methylene Diphenyl Diisocyanate (MDI) derived from ISCC PLUS certified bio-circular raw materials, achieving up to a 99% reduction in carbon footprint compared to traditional MDI. This partnership will allow Carlisle to produce high-performance polyiso-insulation boards with lower embodied carbon.