Middle East Africa Market Update

The prices of toluene di-isocyanate (TDI) in the Middle East and Africa may have bottomed out as demand from both regions shows signs of improvement, industry sources said on Wednesday.

The demand for TDI is stronger because most foamers are returning to the market to restock their inventories as the Eid ul’Fitr festival will end in early September, the sources added.

The spot prices of TDI in the Gulf Cooperation Council (GCC) region on 24 August are at $2,400-2,500/tonne (€1,656-1,725/tonne) CFR (cost & freight), while the prices in Nigeria, the largest African market, are at $2,450-2,500/tonne CFR for Asian and European cargoes arriving in September, market players said.

The smaller markets in the Middle East and Africa saw deals done at $2,550-2,600/tonne CFR for purchases of less than five containers, the players added.

The TDI prices in the Middle East and Africa were soft from July to mid-August because of weakened demand from the downstream foam sectors.

The demand for TDI declined in line with Ramadan and the mounting inventory pressures of Asian and European producers who were seeking an outlet to offload their cargoes. 

Most players said the TDI prices have since stabilised mainly because of a demand recovery from the downstream foam sectors, where buying activities were especially low over the past one and-a-half months.

“Enquiries have increased over these two weeks, although buying ideas did not increase significantly in the presence of more competitively priced cargoes offered by a global major,” a Dubai-based trader said.

A European trader who sells to Nigeria said: “Foamers are more willing to accept fresh cargoes. Demand is simply good.”

A Nigerian foamer added: “We are covered until the first half of September. We need to start to negotiate for cargoes arriving at the end of September or in early October.”

Another reason for the stronger TDI prices is the depreciated US currency. This is because European and Asian producers have no choice but to offer their product at slightly higher prices in US dollars to avoid offering at below the previous month’s transactions, traders and producers said.

“The appreciated euro, Japanese yen and South Korean won have led producers to raise offers in order to secure their margins,” a northeast Asian trader said.

The low stock levels among Asian and European producers are also the cause of the firming TDI prices, lifting selling sentiment as the market is no longer oversupplied, industry players said.

Asian TDI producers are running their units at lower operating rates to curb the increasing inventories, while maintenance shutdowns at European TDI facilities are easing the long supply, the industry players added.

Producers are not under significant pressure to relief their inventories in the meantime, the players added.

“Fierce price wars late last month have stopped and the foamers [are now] aware that cheaper cargoes priced at below $2,400/tonne [CFR Middle East] are not widely available in the market,” a second Dubai-based trader said.

Looking ahead, players said the TDI prices will remain stable-to-firm to reflect the fluctuation in currencies and better demand within the region.

“We do not expect the foam industry to be performing as good as before Ramadan, but [it] will at least normalise,” a second European trader said.

The traditional peak manufacturing season in the Middle East and Africa in the foam sector is from the end of January to May or June, depending on the countries in the two regions, market players said.