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Home | News |Sales Modes of TDI Producers: Overview of Asia-Pacific TDI Market (Part V)
Sales Modes of TDI Producers: Overview of Asia-Pacific TDI Market (Part V)
Updated: 2017-09-07 09:54 Source: PUWORLD Exclusives share:

Understanding of the supply landscape is of great significance to looking for opportunities in the Asian-Pacific TDI market. And the most direct way to get command of it is by comprehension and analysis of sales structure of TDI producers in the region. 

 

TDI is deemed a hazardous chemical, according to widely accepted UN Classification of Chemical Hazards. TDI is referred as UN 2078 and considered to be class 6.1 “Toxic Substances”. The import and export processes are demanding and road transportation cost is high. Trailers loaded with TDI container are banned from expressways in China where transportation cost can be high up to Rmb1/ton·km. Thus the number of participants in the international trade of TDI is relatively small, and the prevalent sales channels are by direct export to buyers and direct or indirect sales from local storage assets.

 

Ranks of TDI producers in the Asian market by capacity are BASF, Covestro, Cangzhou Dahua, Hanwha, Mitsui, Gansu Yinguang, Fujian Meizhouwan, Shandong Juli, and GNFC, India, OCI, South Korean and NPU, Japan.  There are a total of 11 producers and 13 production facilities in operation.  


Source: Orisage Consulting Date Bank


Chemical Giants

BASF is the largest producer in the Asia-Pacific, with two facilities respectively in China and South Korea, together, accounting for one-fourth of total TDI capacity in APAC.  It provides stable TDI supply for all the countries in the region through its global supply and distribution networks. Organizations for direct sales are spread across the major markets in the region, including India, Vietnam and Thailand. TDI for exports in the region are mainly produced in its facility in Yeosu, South Korea, while the Shanghai facility is mostly for internal consumption in China.


Covestro’s share of the export market in the Asia-Pacific ranks second behind BASF, with the sales channels and structures inherited from Bayer which enables direct sales in local markets. Over half of China’s TDI exports are contributed by Covestro’s Shanghai plant.  Given that Covestro has subsidiaries and storage assets across the major markets in the region, all exports of its products are conducted by itself, and to mostly large to medium downstream manufacturers, local distributors and local subsidiaries. 


BASF and Covestro, the two chemical giants combined, hold the majority shares in the Asia-Pacific TDI export market.  


Source: Orisage Consulting Date Bank


Japanese Producer

Mitsui Chemical’s TDI capacity is not significant among other major producers, but due to early entrance into the Southeast Asian market and geopolitical advantages it has established itself as a major player in this part of Asia, with most of its output for exports.  Its products are sold through direct exports or by coordination with local distributors depending on the markets. However, Mitsui’s market share in the Asia-Pacific has been sharply cut down since the permanent closure of its facility in Kashima. 


Source: Orisage Consulting Date Bank

 

Japan NPU, with its limited capacity, is almost exclusively to domestic market. 


South Korean Producers

TDI production in South Korea is mainly conducted for exports as the result of the overcapacity. Channels for direct sales of Hanwha and OCI in the Asia-Pacific region are relatively limited, compare with BASF. Most deliveries are based on multi-level marketing and direct exports to buyers. 


Note:

The Asian figure includes the exports to China and India, into which OCI’s exports were both less than 2%.  


As indicated by the chart above, OCI’s TDI business targets the long tail markets, a way to circumvent the fierce competition in the markets that are featured by large capacity or being a target for major producers. In Asia-Pacific, OCI is committed to markets other than China and India. Its exports into the region are made either through local traders or directly to the buyers. OCI’s export volume is reported to be around 80% of output.

 

Chinese Producers

Chinese TDI producers, Cangzhou Dahua, Gansu Yinguang, Shandong Juli and Fujian Meiszhouwan, mainly supply to the huge domestic market. The small volumes of exports are mainly via traders and distributors.  


Note:

1.  Data from Orisage Consulting Date Bank

2.  Exports include the volume through traders and the direct sales.


As shown in the graph, TDI products by Chinese producers are less than renowned in markets other than Pakistan and India in the APAC. It is reported that some downstream buyers in Southeast Asia countries have never heard of brands of Chinese domestic products while others lack confidence in the quality. 

 

Forecast

In the long run, major producers in the Asia-Pacific, including BASF, Covestro, Hanwha, OCI and Mitsui, have been exporting sizable volumes into Africa and the Middle East.  Saudi Arabia’s Sadara TDI plant commissioned on August 14 and is expected to gradually raise operating rate in the late half of 2017. The production capacity of the plant is more than enough to satisfy demand in Africa and the Middle East in terms of volume. When full operation is achieved, market shares of producers based in the Asia-Pacific are likely to largely decrease with the factors of distance and cost in consideration. 

 

China, Japan and South Korea together exported to Africa and the Middle East a volume f around 103 kilotons of TDI in 2016; with 66 kilotons from South Korea, 19 kilotons each from the two others. South Korean producers, including Hanwha and OCI, would likely to be more severely impacted by the operation of Sadara unit. Sadara once announced that about half of its TDI capacity would go for the markets in APAC, with the rest for Africa and Middle East, which means that the additional 200ktpa capacity is likely land in the Asia Pacific sphere in one way or another, and are more than likely to have devastating effects on the domestic TDI market in China.

 

In the short run, BASF’s list price for September rose up by Rmb5,000/ton from current Rmb40,000/ton to Rmb45,000/ton.  Additionally, BASF’s unit in Shanghai is rumored to be operating at less than 50% for now due to supply issue, although the rumor is yet to be confirmed. On the hand, regardless of the authenticity of the rumor, factors such as the huge surge in list price, fire at the Yeosu refinery and the arrival of the September hot season, are expected to heavily affect the TDI market in China.

 

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