Japan's Polyurethane Foam Market Declines in Early November 2024 Amid Weak Demand and Growing Inventories

The Japanese Polyurethane Foam market continued its downward trajectory, with prices reflecting a bearish sentiment entering November 2024. Demand conditions in the domestic market remained unfavourable, despite some improvement in demand conditions witnessed in the secondary downstream wooden furniture industry. A reduction in production costs, due to improved supplies of key feedstocks such as MDI and TDI, combined with slow demand from the domestic market, continued to influence the market conditions for Polyurethane Foam in Japan.

This trend persisted despite one of the major manufacturers of Polyurethane Foam in Japan, Toray Lycra, increasing prices by ¥30,000/MT to ¥50,000/MT for dispatches scheduled from November 1, 2024. Overall, production conditions for Polyurethane Foam in Japan remained positive, as reported by Japan's Ministry of Economy, Trade, and Industry for September 2024, with data for October 2024 still pending.

Production of Polyurethane Foam grew from 11,914 tonnes in August 2024 to 14,401 tonnes in September 2024, representing an increase of 20.4%. Additionally, shipments of Polyurethane Foam rose from 11,204 tonnes in August 2024 to 13,586 tonnes in September 2024, marking a 21.3% increase. However, inventories of Polyurethane Foam also increased from 3,904 tonnes in August 2024 to 4,010 tonnes in September 2024, representing an increment of approximately 2.7%, which contributed to downward pressure on prices in the domestic market.

In terms of demand, the primary source of Polyurethane Foam consumption came from the wooden furniture sector, where demand increased from 133,675 units in August 2024 to 149,947 units in September 2024, a rise of approximately 12.2%. However, demand conditions in the construction sector remained unfavourable, as Japan’s housing starts decreased for the fifth consecutive month in September, although at a slower-than-expected pace. According to data from the Ministry of Land, Infrastructure, Transport, and Tourism, housing starts dropped 0.6% year-on-year in September, a much slower decline compared to the 5.1% drop in the previous month. Economists had anticipated a decrease of 4.1%.

Additionally, data showed that construction orders received by Japan’s top 50 contractors plunged by 21.3% year-on-year in September, reversing an 8.7% rise in the previous month, keeping demand conditions negative for Polyurethane Foam in the construction sector.

Furthermore, Mitsui Chemicals, another major Japanese MDI manufacturer, was reported to have begun commercial operations at its new MDI facility in South Korea, with a capacity of 200,000 tonnes/year, in late October 2024. This expansion is expected to improve the supply of MDI to Japan. TDI prices also saw a decline of approximately 0.6%, easing production costs for Polyurethane Foam.

Overall, prices of Polyurethane Foam declined by 1.3% during the first week of November 2024, settling at USD 4,305/MT FOB Tokyo. Suppliers continued to work with existing inventories, as the sluggish performance of the primary downstream construction sector led to inadequate follow-up orders.

Looking ahead, demand conditions for Polyurethane Foam in Japan are expected to improve in upcoming weeks 2024, as seasonal winter demand is anticipated to drive growth in the downstream construction industry, where Polyurethane Foam is used extensively as an insulation material. Additionally, improved export demand from the East Asian market, along with seasonal festive demand in North America, is expected to support market conditions. A further improvement in the prices of key feedstocks, particularly MDI and TDI, is also anticipated further bolstering the anticipated rise in production costs of Polyurethane Foam.