Increase in Europe MDI prices amid shortages of supplies

The MDI (Methylene Diphenyl Diisocyanate) price trend remained firm at the beginning of Q3 of 2024, and quotations rose by almost 1% in July 2024 amid fluctuation in demand and shortages of supplies. The automotive sales improved in Germany during June 2024 by 26% from the previous month. However, in the first half of 2024, electric vehicle (EV) sales in Germany declined by 16.4%, with Tesla experiencing a substantial sales drop of 41.6%. Consequently, the consumption of polyurethane foam remained consistent in the automotive sector, which improved the orders for PU component MDI.

However, the MDI price trend tilted downward in the second half of July as market players reduced prices by 0.8% to boost sales amid ample supply availability. The Demand for MDI remained sluggish among downstream polyurethane manufacturers due to reduced consumption of construction materials in the construction sector. This weakness in demand for MDI and polyurethane materials was attributed to a downturn in the construction industry, highlighted by a 5.7% year-on-year drop in housing market prices. Major cities saw substantial decreases, with single and two-family homes dropping by 9.5% and apartment prices falling by 4.6%. According to Statistics Deutschland, residential property prices decreased by 5.7% in the first quarter of 2024 compared to the previous year, marking the sixth consecutive quarter of declines. Additionally, residential properties were 1.1% cheaper at the beginning of 2024 compared to the fourth quarter of 2023. These ongoing challenges in the housing market contributed to reduced consumption of polyurethane materials and its component, MDI. At the same time, shifting demand to bio-based materials in the region is also the key reason for this price decline. As a result, manufacturing rates declined, leading to a downturn in the eurozone manufacturing sector at the start of the third quarter. It was reflected in a decrease in the Manufacturing Purchasing Managers' Index (PMI) in July 2024, driven by a significant drop in new orders and increasing costs.

Furthermore, the cost support declined on feedstock Benzene due to the decrease in upstream Brent Crude Oil prices, driven by reduced transportation activities and decreased fuel consumption during the summer holiday period in the region. It negatively impacted the production costs of MDI. Conclusively, at the end of July 2024, MDI Polymeric Grade FD Hamburg prices witnessed USD 2490/MT.

As per the estimation, market players might raise their MDI quotations amid the stressed availability of supplies due to low production rates during the summer holidays in the region. Simultaneously, MDI production costs are anticipated to increase due to the anticipated increase in feedstock Benzene prices. Concurrently, demand for MDI from the polyurethane segment would remain consistent.