Chinese TDI situation in March
As downstream demand had not recovered, TDI price in China began to fall at the beginning of last week. Meanwhile, manufacturers and dealers reduced price to expedite sale under the pressure of inventory, shipment and finance. Today, the ruling offer for Shanghai-originated goods stands at 36,000-36,500 RMB Yuan/ton in drum with invoice included. Offer for goods from indigenous manufacturers stand at around 35,000-35,500 RMB Yuan/ton, down about 3,000-4,000 RMB Yuan/ton from the beginning of last week. With continuing decline, the price has set on a downward trajectory.
1. News about price adjustment by manufacturers
On last Friday, Cangzhou Dahua reduced its guidance price for TDI. On March 13, it officially adopts the policy of deferred settlement (weekly list price settlement). In addition, Covestro Shanghai lowered its guidance price by 1,000 RMB Yuan/ton on March 12 due to its high inventories. As both foreign manufacturers in Shanghai and indigenous manufacturers were pessimistic about the future market, the middlemen intensified their efforts to sell off, which resulted in market turmoil. Detailed price adjustments by the two manufacturers over the past two weeks are as follows:
(1). March 9: according to market information, Cangzhou Dahua’s latest fixed offer for TDI was 38,500 RMB Yuan/ton, down 500 RMB Yuan/ton from last week.
(2). March 12: it is heard that the manufacturer’s latest fixed offer for TDI stood at 38,000 RMB Yuan/ton, down 500 RMB Yuan/ton from last week. Currently, the operation of its 150,000 tons/year plant is normal.
(3). March 13: it is heard that the company adopted the policy of deferred settlement for its TDI, and its list price for this week is 38,000 RMB Yuan/ton.
(1). March 12: it is heard that Covestro’s latest fixed offer for TDI stood at 38,800 RMB Yuan/ton, down 1,000 RMB Yuan/ton from prior period. Currently, the operation of its 250,000 tons/year plant is normal.
(2). March 14: it is heard that Covestro’s latest fixed offer for TDI stood at 37,800 RMB Yuan/ton, down 1,000 RMB Yuan/ton from prior period.
2. Supply and demand sides：
As for the supply, operating rate of TDI manufacturers has remained high since the beginning of February. Assuming that their average operating rate reaches 90%, the total TDI supply is estimated to be around 95,000 tons over the past one and a half month. In terms of demand, based on last year’s average monthly TDI consumption in China, it can be estimated that 90,000 tons of TDI would be consumed in one and a half month. However, because of the long Spring Festival holiday during this period, many downstream plants started to shut down plants from February 5th or 6th, downstream demand became very sluggish. So far, downstream demand has not fully recovered. The resulting temporary oversupply puts pressure on the price.
As for downstream customers, some customers, particularly those large sponge manufacturers, stocked inventories before the holiday. Whereas small and medium-sized manufacturers had limited inventories due to rare orders and the high price of TDI, which resulted in low profits. After the Lantern Festival (March 2), downstream plants began to go into operation, which coincided with the falling TDI price. Affected by the mentality of buying when prices going up instead of coming down, postponing the purchase and being prudent in stocking inventories became the buyers’ choice. This also contributed to the further decline in overall demands.
The current market situation is similar to last year's. First, the dealers sell off goods, which results in reduced goods in the distribution channel.
Meanwhile, as downstream customers are bearish on the market, they hold low inventories. When the threshold is crossed, the mentality of all parties changes. As downstream customers have limited inventories, driven by the fear of price increase, they will rush to make purchase. However, because at this moment the majority of the goods are not held by dealers but by TDI manufacturers, the price increase period begins.
As a product with changing price, TDI always sees ups and downs in its price, with no constant rise or decline, let alone constant stability in China. Besides, the rise and decline are not closely linked to the balance between supply and demand. Instead, they depend more on the mentality and game of the buyers, sellers and middlemen. We believe that bottom fishing may not be easy for customers needing to stock inventory when TDI price is falling. Therefore, PUdaily recommends a more reasonable method, namely making purchase in batches at different price level so as to mitigate risks.
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