Overcapacity can hardly prevent TDI price arrogance

Yantai Juli’s October listing price was significantly raised by 6,000 yuan/ton compared with September, and the implementation of 28,000 yuan/ton. In the short term, the TDI market may continue to maintain tight supply, and TDI prices may still have room for growth.

I. The local quotation exceeds 30,000 yuan/ton. According to the data, the price of TDI in North China was 19,000-19,800 yuan/ton at the beginning of the year, and the latest quotation was about 27,500 yuan/ton. In the southern China region, TDI was quoted at 19000-19300 yuan/ton at the beginning of the year. It is RMB 30,500/ton; in early Eastern China, TDI was quoted at RMB 19,500-20000/ton, and the latest offer was RMB 28,000-29,000/ton. Based on this calculation, since the beginning of the year, the price of TDI has increased by more than 30%.

Analysts believe that the increase in TDI prices is mainly due to contraction at the supply side. In March 2012, the Ministry of Commerce issued an announcement deciding that an anti-dumping investigation against imports of diisocyanate (model TDI80/20) originating in the European Union would be initiated immediately. According to the Haitong Securities Research Report, domestic anti-dumping measures against imports of countries such as South Korea, Japan, and the United States have been about 10 years, and anti-dumping measures are good for domestic manufacturers.

The data shows that the increase in TDI prices started in the second quarter. In May, domestic TDI prices continued to rise at a high level. By the end of the month, mainstream manufacturers reported that the June listing price was generally around 22,500 yuan/ton. The shutdown of some domestic and foreign devices resulted in a reduction of the supply side. BASF shut down some foreign devices and Shanghai Bayer TDI devices stopped for about one month. The two devices resulted in the loss of nearly 400,000 tons of production capacity.

In June and July, the TDI market cooled, but after a short period of adjustment, TDI prices continued to rise in mid-August. Analysts believe that the transportation of dangerous chemicals is hindered before and after the National Day, and the supply of domestic factories is still tight, and most dealers choose to close before the National Day holiday. It is expected that the prices will continue to be firm in the near future.

Second, the overcapacity should not be overestimated From the industry data, the TDI industry's production capacity is very abundant, and the current price rises form a strong contrast. According to the Haitong Securities Research Report, it is estimated that in 2012, China will add about 500,000 tons of TDI capacity, which is more than 100% increase compared with 2010. The concentrated release of production capacity makes the industry short-term supply pressure.

In this regard, analysts believe that last year's TDI industry is at a low point, and production companies, distributors, and downstream companies have relatively small inventory, and there is a need for restocking this year. On the supply side, despite the increase in production capacity, some of them experienced production shutdowns and overhauls, and some of them were installed in global markets. The temporary shutdown of overseas production capacity has aggravated domestic supply shortages. Therefore, it is not appropriate to overestimate domestic overcapacity.

In fact, the market strategy of leading companies has also changed. The concentration of the TDI industry is relatively high. The domestic price maintenance in the cost line in 2010-2011 was mainly due to the new production capacity of Shanghai BASF and Bayer, and the low price impact on the market. At present, the two major manufacturers have a total production capacity of more than 50% and have market pricing power. Since 2012, both companies have adopted a strategy of raising prices to make profits. The second-tier companies such as Cangzhou Dahua and Gansu Yinguang have followed the pricing strategy.