Methylene Diphenyl Diisocyanate (MDI) prices in Europe saw a decline in the first half of December 2024, driven by lower demand in the construction and automotive sectors amid a broader economic slowdown. Additionally, reduced export capacity and rising regional inventory levels added further downward pressure on MDI prices.

The euro area's manufacturing sector saw a deeper contraction in November, amid sharper declines in new orders, production, purchasing activity, and inventories. The demand for MDI in the Polyurethane segment was constrained by economic challenges and a 2.3% rise in Eurozone inflation. In November 2024, the European construction sector faced significant challenges, with broader economic issues leading to a slowdown. Eurozone economic momentum fell to a 10-month low, signaling contraction across both manufacturing and services. Inflation rose slightly to 2.3%, though it did not alter the European Central Bank's monetary easing stance. Political instability in France and Germany further dampened investor confidence, adding to the uncertainty. Despite these pressures, some resilience was seen in regional real estate indices, with modest gains in the residential and retail sectors. However, construction activity remained subdued, affected by weaker demand, rising borrowing costs, and political uncertainties, resulting in cautious optimism for the future. This subdued demand impacted the consumption of polyurethane materials in the sector. Simultaneously, the demand for polyurethane (PU) materials in the automotive sector showed signs of decline, as domestic automobile sales in Belgium dropped significantly in November 2024. Manufacturers in Belgium sold 31,824 units, marking a 5.5% decrease compared to October and an 8.3% decrease year-on-year. This decline in vehicle sales, alongside broader industry challenges, led to a reduced demand for PU materials used in automotive manufacturing. The reduced sales figures indicate a more cautious market outlook for MDI.

At the same time, MDI production rates remained stable in the region, while a decrease in feedstock Benzene prices, driven by reduced demand and material purchases by downstream industries, negatively impacted the cost support for MDI production. Supply rates stayed steady, with inventory levels firm in the regional market due to reduced exports. In December 2024, a decrease in shipping capacity to North Europe by 11%, along with capacity constraints in the Mediterranean trade lane, led to tight space availability for MDI exports. These disruptions resulted in increased regional MDI inventory levels, as manufacturers and exporters faced delays and logistical bottlenecks in securing shipment space.

As per the ChemAnalyst estimation, Methylene Diphenyl Diisocyanate (MDI) prices are expected to rise in the upcoming weeks as demand from buyers improves along with increased procurement activities. Simultaneously, MDI production costs are likely to escalate due to rising energy prices, and supply rates may remain constrained during the peak winter season. Additionally, while orders are anticipated to increase in Q1 2025, production could face challenges due to the limited availability of feedstock Aniline supplies.