Decreasing MDI Prices in Europe Amid Diminution in Consumption

In November 2024, the Methylene Diphenyl Diisocyanate market (MDI) in Europe exhibited bearish trends, driven by reduced offtakes and falling production prices. The market saw an adequate supply of existing MDI stocks, while production levels remained moderate and export rates were low, leading to an increase in domestic inventory levels. The Orders for MDI have further declined from buyers, driven by weak demand from the Polyurethane sector amid slow consumption of PU materials in the construction sector. In October 2024, the Eurozone construction sector remained under pressure, facing contraction as economic and political uncertainties weighed heavily on activity. Reduced demand across commercial, civil engineering, and residential construction is evident, with major economies like Germany and France witnessing persistent challenges in both new project initiations and overall investment sentiment. Cost pressures have eased, driven by lower input prices and a drop in subcontractor rates, yet these positives highlight an underlying issue of waning demand rather than improved sector dynamics.

At the same time, the euro area manufacturing downturn extended into the fourth quarter, with production falling for the 19th consecutive month and the MDI production rates remained intermediate in the country. Meanwhile, the stabilization in feedstock Aniline costs coupled with the decline in Benzene prices negatively impacted the production costs of MDI. At the same time, the exports were slightly low to importers, and the European Exports continued to decline in October, marking the eighth consecutive month of decrease, although the rate of decline has slowed. This shift highlights an increasing trade imbalance, with a growing disparity between long-term import and export rates. In the first part of 2024, import volumes have seen a notable increase, while export volumes have remained relatively flat. As a result, for every container exported from Europe, more are now being imported, indicating a widening gap in trade flows. Simultaneously, the MDI import rates were low, and the import index declined slightly in October 2024 from the previous month.

Conclusively, at the end of the first half of November 2024, MDI Polymeric Grade FD Hamburg quotations in Germany hovered at USD 2420/MT after witnessing a decrease of 5% in the October month prices.

As per the estimation, the price trend for Methylene Diphenyl Diisocyanate (MDI) in the European region would alter in the second half of Q4, with prices likely to rise. This shift could be influenced by a combination of factors, including the potential tightening of MDI production, which may be impacted by moderate feedstock availability. Additionally, the increase in energy costs during winter could drive up operational expenses, further affecting production economics. The buyers might increase stocking practices ahead of the peak winter season, anticipating higher MDI prices and potential supply constraints.