ISOL Trend Analysis Team
The polyurethane market in April has entered a phase that cannot be simply explained by rising raw material prices. Currently, the market is more focused on how prices are being formed and how quantities are being controlled, rather than just the fact that prices are rising. On the surface, it appears to be an increase in MDI, TDI, and Polyol prices, but a closer look reveals that this market is more about the convergence of rising costs, supply control, and logistics disruptions, which are changing the very order of the market.
The forces driving the market this April can be summarized in three points. First is geopolitical risk. The issue in the Strait of Hormuz is no longer just a news headline; it is now a variable that actually burdens energy and logistics. Second is structural cost increases. The prices of natural gas in Europe and LNG in Asia are both rising, along with increases in naphtha and benzene prices, leading to higher production costs across the isocyanate chain. Third is supply control. Global suppliers are not only raising prices but also limiting orders, causing the market to enter a competition for securing quantities alongside price increases.
Watching this market, I particularly feel that the structure of a "Triple Threat" is becoming a reality. Raw material surges are added on top of basic production costs, followed by energy surcharges, and finally, logistics premiums. When transportation delays due to the diversion around the Cape of Good Hope, soaring gas prices in Europe, and rising naphtha and benzene prices occur simultaneously, producers can no longer maintain existing prices. Ultimately, passing on costs becomes a necessity rather than a choice. Therefore, the price increase in April seems more like the starting point of a significant price rise rather than a short-term anomaly.
Actual market movements are already flowing in this direction. DOW has implemented strong measures by raising Polyol prices in the Asia-Pacific region by $300 per ton while controlling orders by 100%. BASF has raised prices for MDI and TDI by $500 per ton in some regions of East Asia, and WANHUA is also moving to increase the prices of all MDI products by €500. Huntsman has added a natural gas surcharge to MDI, and COVESTRO has raised PU system prices by 30%. This is not just a matter of "trying to raise prices"; it signifies that suppliers are beginning to take market leadership in both price and quantity.
The MDI and TDI markets are also strengthening in different ways. MDI prices for domestic PMDI in China have already risen to high levels, and the rising costs of benzene and toluene continue to be a burden. With rising production costs in Europe and some supply disruptions, the reasons to lower prices are diminishing. The same goes for TDI. Regular maintenance, reduced supply, and force majeure issues from major manufacturers are leading to a decrease in the overall supply pool.
However, the bigger problem lies downstream in the polyurethane market. When raw material prices rise, downstream products like soft foam, rigid foam, CASE, and TPU inevitably bear that burden. The question is whether this burden can be immediately reflected in selling prices. The market is not as simple as it seems. The recovery rates of demand in the automotive, furniture, construction materials, and industrial goods markets vary, and the contract structures are different. If raw material prices have already risen, but end customers are not ready to accept that increase, downstream margins will collapse first. The longer the price pass-through is delayed, the more manufacturers will bear both inventory and cost burdens.
The order control that started in the Polyol market is a very uncomfortable signal from a downstream perspective. It is only possible to secure the contracted volume, and spot flexibility disappears. As a result, companies prioritize securing volume over price negotiations and must change their inventory management strategies. In such a market, the later you act, the more likely you are to secure less volume at a higher price. Therefore, right now, it is much more important to ask, "Can we secure the required volume at the specified time?" rather than "How much can we buy it for?".
Thus, the response for the second quarter prioritizes securing contracted volumes over price negotiations, and it is necessary to check our inventory and supplier inventory in real-time, as well as to secure alternative supply sources in advance beyond existing trading partners. At the same time, discussions on cost pass-through with downstream customers should be proactively prepared. In a situation where raw materials, energy, and logistics are all fluctuating simultaneously, a response of "let's adjust later" can lead to even greater losses.
Ultimately, the rise in prices in the polyurethane market in April reflects a change in the order surrounding supply. The market is now moving from a phase of looking for cheap volumes to a phase where it must first consider how to secure stable volumes.