In the first half of April 2025, the European Methylene Diphenyl Diisocyanate (MDI) market experienced a bearish trend, with adequate supply to meet the demands of the downstream polyurethane industries and moderate production rates. Production costs eased due to a decline in input costs. At the same time, weakness in the automotive and construction sectors in Europe led to reduced demand for MDI-based PU materials, as automotive sales slowed, and the construction industry contracted. MDI prices are expected to continue declining in the coming weeks, with subdued demand likely to persist through the first half of Q2. Increased shipping activity during the summer and falling benzene costs could further pressure both prices and production costs, reinforcing the bearish market outlook for MDI.

MDI supply availability in the region was sufficient to meet the needs of the downstream polyurethane industries, with production rates remaining moderate. At the same time, MDI production costs eased due to a decline in feedstock benzene prices, which were influenced by softer demand from downstream industries and a sudden drop in crude oil prices after OPEC+ decided to unwind its production cuts in April. However, supply chain challenges arose due to external trade tensions and operational issues at key European ports. U.S. tariffs on European goods added uncertainty, while congestion and delays were reported at major ports like Rotterdam, Bremerhaven, and Antwerp. Southern European ports, such as Port Said and Tangier, also faced increased yard density, leading to adjustments in vessel schedules and reviews of operations to maintain supply chain efficiency.

Concurrently, the demand for MDI showed signs of weakening in downstream polyurethane industries due to reduced consumption of PU materials amidst challenges in the automotive and construction sectors. The European automotive market faced a significant downturn, with Tesla’s sales dropping sharply, and although BYD’s growth is notable, overall industry growth remains under pressure. The focus on electric vehicles may not be enough to offset the broader slowdown. Similarly, the construction sector in the Eurozone contracted further, with declines in major markets like Germany and France, reducing demand for MDI-based materials used in insulation and construction products. While some regional pockets of growth exist, the overall market sentiment remains bearish, with limited growth prospects in both sectors.

MDI prices are expected to decline in the upcoming weeks of the second quarter of 2025. Offtakes from the market might remain low during the first half of Q2, as demand from downstream polyurethane industries is anticipated to stay subdued. At the same time, increased shipping activities due to favorable trade conditions during the summer could further put downward pressure on MDI prices. Additionally, the expected decline in feedstock benzene costs due to the decline in cost support from upstream Crude Oil may lead to lower production costs, further influencing the market dynamics.