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Polymeric MDI in Waxed and Waned

PUdaily, Shanghai-Polymeric PMDI price is seeing a situation of a big rise and fall.

In the course of the last two months, PMDI price trend can be concluded in a word that is “just for thrill”. PMDI goes down from RMB 23,500-19,500/ton in the second half of April, a cliff-like drop of RMB 4,000/ton, and then, it rebound to RMB 22,500/ton currently, up by RMB 3,000/ton. Notwithstanding the law of market, a lesson can be taught from such fluctuation to policies of factories and attitudes of participants.

Market policy


Wanhua strives to stabilize the market. Dominated by suppliers, black material market is influenced by factory policies. Wanhua quotes at RMB 25,500/ton in April and RMB 23,000/ton in May. Also, discounts are made to keep the market stable. And yet in early April, selling price heard at RMB 24,000/ton drops away from the purchasing price. Under the costs pressure, distributors are reluctant to sell at a low price and come to no deal. Also, Wanhua source eyes a price gap of RMB 1,000/ton with others. Plants in downstream prefer the cheap sources, which lessen the transaction and circulation of Wanhua source. As such, it does not deliver an expected effect on the market.

Covestro lowers its quotation successively. In early April, black material is under depression in spite of the high price, and appears a sign of fall. All factories raise their quotations to stabilize the market first. However, Covestro decreases the price continuously amid inventory pressure. Against the backdrop of the Belt and Road initiative, other sources follow the downtrend, accelerating the slump to RMB 19,500/ton.

Tracing back to the upsurge in May, we find that it is posed by the constraint on supply. During May, factories all conduct maintenance. Equipment movements are as followed.

Wanhua: Second-phase equipment in Ningbo starts to maintain on May 16 for 16 days, and it is a regular maintenance with no influence on supply. Other facilities are in regular operation load of 60-70%. Supply is regular.

Covestro: Covestro sustains 70% operation load. The force majeure in Europe places a rise in export. Currently, supply is cut.

BASF: Equipment is Shanghai starts to maintain on May 4. Chongqing one keeps low load. Present supply is regular.

Huntsman: Maintenance is started on May 11 for two weeks. Supply is cut and the restart is delayed.

Lianheng: Maintenance begins on May 3 and a release accident occurs during this period. Maintenance is interrupted and the restart time is to be delayed.

Tosoh Rui’an: Trail operation is on May 4, yet first production is unqualified. Qualified one comes after the second production. Currently supply is limited.

Most black material factories face supply crises except Wanhua and BASF Chongqing. However, high price of Wanhua appeal few purchase and low operation rate of BASF Chongqing places insufficient supply to cover the shortage. In April, PDMI is offered at USD 2,700 CIFSEAsia and India whilst domestic price is equal to USD 2,300/ton. Such big price gap drives factories in Japan and South Korea to export to SE Asia and India and sustain old customers in China only.

Attitude


Present black market is as changeable as the stock market. In the stock market, there are two kinds of strategies. First on is to purchase when price rises and sell when the price decrease, which is suitable to the situation with obvious trend. The other one is to purchase when price is low and sell when price is high, which is often applied during consolidation. That purchasing when the market is up has already been the normal attitude in the black material for the being. Middlemen and downstream all lessen purchase and sell more amidst recession in April. Meanwhile, factories constrain the supply to push the price up. Consequently, overall inventory is low and the supply cannot meet the needs, boosting the price. Then, middlemen tend to hold their inventory, while downstream are worried whether the price will rise further and making more inquiry. All these factors play a superimposed effect, intensifying the roaring.

Demand

Depending upon PUdaily’s data, refrigerator, freezer and auto, the major downstream sectors of black material, register a rise over the same period over 2016. Refrigerator reports a year-on-year growth of 10.5%, freezer 3.8% and auto 8.0%. Such situation is opposite to what middlemen reflects that demand is not prosperous in boom season. Yet, PUdaily believes it is not a conflict. Black material is sold in both direct and distribution way. Factories make direct selling to big customers and SMEs tend to make a purchase from distributors.

Downstream is flagging amid environmental protection supervision, with many SMEs relocated or shut down. Distributors feel their coolness. Adding to an upsurge in the beginning of this year, SMEs can only sustain the old customers for costs pressure. Building insulation sector also convert to PS lamination with lower costs. On the whole, the demand is lower than previous years.

PUdaily regards that market is determined by demand. Regular demand of SMEs should not be confined by high prices. We’d prefer a more rational balck material market.

As for market ahead, Wanhua is to issue the quotation of June which is supposed to further stabilize the market. Given discounted supply and selling price lower than the purchasing price, Wanhua is deemed to in a plight of selling. As such, the quotation is likely to see no change or be offered at RMB 24,000/ton with discounted supply.In early June, most equipment will come back to production. However, these productions are expected to cover the direct-supply orders. As all mentioned above, market is to maintain stability for short supply at first and then have a shadow fall without enough demand to support.