Limited Supplies and Moderate Demand Drove HDI Prices Upward in Europe During March 2024

The Hexamethylene Diisocyanate (HDI) price trend continued to showcase bullish movement in Europe like the previous month, and prices rose by 2.4% during March 2024. The availability of stocks was low in the market amid weak availability of feedstock supplies and affliction in operating rates in the producing country amid labor shortages. As per the sources, the Eurozone's Manufacturing Purchasing Manager's Index declined again in March 2024 and remained below 50, indicating a further slowdown in manufacturing sector activities. Sources also reflected those new orders in the European region witnessed improvement in March 2024 compared to the preceding month. Despite these challenges, demand for Hexamethylene Diisocyanate remained firm from buyers amid the further anticipation of the ease in the Eurozone annual inflation rate by 6.9% and monthly inflation rate by 0.9% in March 2024. Meanwhile, the automotive sales volume experienced a rise in the country over the past month, while Tesla commenced production of right-hand drive cars in Germany to cater to Indian buyers. Consequently, the demand for Polyurethane components like HDI remained stable in the automotive and manufacturing sectors.

Meanwhile, the availability of HDI stocks was limited in the European market for the past month due to affliction in the production rates. One significant factor that affected the production costs of HDI was the surge in feedstock Butadiene prices amid the volatility in Brent crude oil prices resulting from production cuts by OPEC+ and the moderate availability of US stocks in the international market. Such fluctuations in crude oil prices often rippled through the petrochemical supply chain, impacting the prices of intermediate products like Butadiene. Furthermore, the decrease in skilled foreign labor, attributed to escalating racial tensions within the nation, probably influenced the operational capacities of HDI manufacturing facilities. A scarcity of skilled labor resulted in disturbances to production schedules, potentially diminishing output and escalating costs. Moreover, regarding air cargo labor, Lufthansa's operations in Germany faced disruptions due to repeated strikes by cargo handlers affiliated with the Verdi union. It further impacted HDI supplies within the market.

According to ChemAnalyst data sources, the Hexamethylene Diisocyanate (HDI) FOB Hamburg quotations in Germany witnessed USD 5580/MT at the end of the first quarter of 2024.

As per the estimation, the HDI prices will increase in Europe as demand may increase from buyers during Q2 of 2024 amid easing inflation rates in the region. Simultaneously, HDI offtakes will likely remain firm from the Polyurethane segment due to the expected rise in demand for products in the construction sector. Buyers may showcase a willingness to pay higher prices to secure required quantities amidst the declining inflation rates in the region. Meanwhile, HDI supply rates may remain low in the market due to a decline in operating rates at manufacturing units amid the labor shortages. Furthermore, the freight volumes will remain low because of the blank sailing phenomenon.