Supply Chain Disruptions Cause Significant MDI Price Swings in the US

The Methylene Diphenyl Diisocyanate (MDI) price trend oscillated in June 2024 amid fluctuations in demand-supply dynamics. In the first half of June 2024, the persistent decline in consumption of Polyurethane materials in the construction sector kept the MDI orders low from Polyurethane manufacturers, and producers decreased their quotations to improve offtakes from the market. At the same time, the market experienced consistent availability of MDI stocks amid average offtakes from buyers and stable operating rates at manufacturing facilities. The manufacturing rates were steady amid a reduction in the prices and the firm availability of feedstock Benzene supplies during the first half of the month. It eased the production costs of MDI. On the contrary, the cost support was firm from the feedstock Aniline as the availability of feedstock Aniline supplies was moderately low in the regional market due to reduced production rates in the H1 of the month. 

Simultaneously, the MDI demand was sluggish in the Polyurethane segment due to decreased material orders from the construction sector. In April 2024, the US construction sector continued to decline amid decreased construction spending. According to data from the US Census Bureau, construction spending was estimated at an annual rate of USD 2,099.0 billion in April 2024. It showcased a slight decrease of 0.1% from the revised March estimate of USD 2,101.5 billion, with further declines anticipated in May. Annual private construction spending amounted to USD 1,611.9 billion, down 0.1% from the revised March estimate of USD 1,613.3 billion, with expectations of continued decline in May due to higher borrowing costs. Non-residential construction reached an annual rate of USD 721.5 billion in April, marking a 0.3% decrease from the revised March estimate of USD 723.8 billion.          

However, the MDI price trend fluctuated, with prices rising in the latter half of June 2024 as market demand for MDI improved among buyers stocking up towards the end of the second quarter. This increase was driven by the expectations of higher consumption for producing Thermoplastic Polyurethane used in manufacturing PU sole footwear, which typically sees increased demand during the rainy and monsoon seasons. Moreover, the US Manufacturing Purchasing Manager's Index increased in June 2024, indicating expansion in manufacturing sector activities. Concurrently, cost support strengthened due to higher demand for feedstock Benzene from the downstream value chain.

Conclusively, at the end of June 2024, MDI Polymeric Grade FOB Louisiana prices hovered at USD 2540/MT.

As per the estimation, the MDI prices would increase in the US market at the beginning of the third quarter of 2024. Logistics could face disruptions during the third quarter due to La Niña, potentially impacting variable costs. At the same time, the demand for MDI may remain firm from Polymer manufacturers due to increased consumption from the Polyurethane segment.