TDI RMB and USD Markets Seem to Diverge
2012-05-28 [Source: Pudaily]
PUdaily.Shanghai-As we know, the largest demand for TDI comes from the upholstered furniture industry in the downstream. According to the statistics published by China Furniture Association, the graph below has showed China upholstered furniture output from March 2010 to December 2011. From this, we can see the demand for upholstered furniture in different periods.
It is implied that the downstream foam demand has been increasing till June. But there is something disharmonious we should admit that this year the output of upholstered furniture in April (3260176.15 units) is lower than that in March (3260176.15 units), which is confirmed by askci.com. A few reasons may lie in buyers' resistance against high feedstocks costs since the middle of April and unsmooth sales of upholstered furniture in Q1.
Last time, we mentioned that Bayer's turnaround of its TDI plant tightened supply, resulting in the scarcity of Shanghai resources. In June, BASF TDI facility will conduct maintenance, which may upset again market insiders. Nevertheless, good news also exists. Two newly-built TDI units are going to come on stream therefore the supply tension will alleviate to some extent.
Apart from the outage of Bayer's TDI facility, there are also other reasons to explain TDI shortage in the domestic market. First, high TDI USD quotations make traders reluctant to bring imported materials into the mainland so stocks are tight in South China. Second, many home-made products have been exported to the outside for higher profit margins due to roaring TDI prices in Middle East and Africa. However, please kindly note that this situation may not last for long.
In recent days, to our surprises, TDI RMB and USD markets seem to diverge. In RMB market, TDI quotations keep going up and then stay at firm levels while the USD quotations continue to decrease, not only in Hong Kong.
On May 15, a trader in Middle East said the TDI price had come down and thought the market would continue to soften. Actually, the quotation decreased to USD3300/ton on May 24.
On May 16, another importer in Africa said: "According to many customers, European suppliers are trying now to decrease their offers and the demand in Africa slows down because of hot season. During this period, most of African customers stop making orders." At that time, many buyers were purchasing at USD3450/ton CFR Casablanca.
As Middle East and Africa has ended uptrend of the TDI market, players are waiting for the price to further decrease, creating unfavorable conditions for TDI exportation of home-made resources. Meanwhile, it will become easier for Hong Kong stocks to get into the domestic market if TDI USD quotations continue to slide down.