PU Resin Prices Rise in East Asian and North American Markets Due to Low Production

In the first half of August 2024, Polyurethane (PU) Resin prices experienced a notable 1% increase. This rise is attributed to constrained production levels despite persistently weak demand. The production issues are largely due to reduced output of Toluene Diisocyanate (TDI), a key feedstock for PU Resin. Mitsui Chemicals, a major TDI producer, has scaled back operations at its Omuta plant, which has a capacity of 120,000 metric tons per year. This reduction in production has driven TDI prices up by 2.55%, subsequently impacting PU Resin prices.

In Japan, the construction industry's slump has led to subdued demand for PU Resin. Housing starts in Japan declined by 6.7% year-on-year in June 2024, worsening from a 5.2% drop in May. This decline spans various housing categories: owned homes decreased by 5.6%, rented homes by 6.2%, and prefabricated homes by a significant 12.6%. Despite a rise in building starts for issued constructions (up 3.2%) and two-by-four constructions (up 8.3%), which could provide some support to the PU Resin market, the overall sector continues to show a pessimistic outlook. This downturn is further exacerbated by Japan's aging population and labour shortages, which have resulted in a rising number of vacant homes. The highest vacancy rates are found in Western Japan, with Wakayama and Tokushima both at 21.2%, and other regions like Kagoshima and Kochi also showing high vacancy percentages, which further contributing to drag on the demand for PU Resin

In the US, PU Resin prices also witnessed a 2% increase in forts half of August 2024. The price rise is due to tight supplies and production challenges. One producer was reported to remained under force majeure on MDI through July due to upstream issues caused by Hurricane Beryl earlier in July, but those issues had been resolved, and the producer had begun rebuilding inventory, which subsequently led to increments in the prices of feedstock MDI and PU Resin. The construction sector showed moderate but steady demand, though overall market conditions are pressured by a recent decline in housing permits. In July, housing permits fell 4% from June and 7% from the same month in the previous year, according to data from the US Census Bureau. Single-family housing starts continued to decline, dropping 14% from the previous month and 15% year-on-year. Conversely, multifamily starts saw a 12% increase from June but were down 24% compared to the previous year. Single-family housing permits also fell by 0.1% from June, marking the sixth consecutive month of declines continuing to be drag on the consumption of PU Resin.

Overall, PU Resin prices are expected to remain elevated across both the US and Far East Asia markets. In the US, the need for inventory restocking ahead of the festive quarter is expected to sustain higher prices. Meanwhile, in Japan, the combination of low production and moderate demand is anticipated to contribute to a continued shortage of supplies of PU Resin in the coming weeks.