Hello, this is the ISOL trend analysis team.
The perspective on the TDI market is gradually changing. In the past, the focus was on how much demand would increase, but now the more important question is 'who, how much, and where will it be produced?' This shift is occurring because, in a situation where global demand growth is slowing, the restructuring of supply capacity is entering a phase that will determine the direction of the market.
TDI is a typical oligopoly market supported by a small number of large facilities. It is used in various industries such as flexible foam, furniture, automotive interiors, and coatings and adhesives, but its demand is closely linked to the economy and does not exhibit explosive characteristics. From a global perspective, TDI demand continues to grow at a relatively moderate rate of about 3-5% per year, which is why the balance of the market has been more sensitive to supply-side variables than to demand.
Currently, global TDI operating production capacity is estimated to be around 3.5 to 3.55 million tons. A significant portion of this is already concentrated in China, and the direction of future changes is also leaning towards 'strengthening the China-centered supply structure.' To understand this trend, it is necessary to look at the capacity structure of major companies.
The largest player is Wanhua Chemical. Wanhua Chemical currently has an annual TDI production capacity of about 1.11 million tons, and when the Yantai industrial complex and the new facility in Fujian are fully operational, it is expected to expand to a total of 1.44 million tons. As the world's largest MDI and TDI supplier, Wanhua Chemical can be seen as effectively serving as the benchmark for the TDI market.
The next major players are European companies. BASF has a TDI capacity of about 920,000 tons globally, and Covestro maintains a production capacity of about 910,000 tons. However, a common point among these companies is that in recent years, they have focused more on reducing and optimizing existing facilities rather than on new expansions. Due to rising energy costs and stricter environmental regulations, TDI facilities in Europe and some regions are under structural pressure.
In fact, TDI facility closures or withdrawals have occurred in Germany, Japan, and Latin America, resulting in a significant reduction in the 'excess capacity' of the global market compared to the past. Against this backdrop, it is not surprising that TDI prices have fluctuated significantly in recent years due to supply events.
Amidst this, a noteworthy change is the movement of Hualu Hengsheng. Hualu Hengsheng is promoting a TDI facility with an annual capacity of 300,000 tons centered around its base in Jingzhou, Hubei Province, and is considering a structure that can be expanded to 600,000 tons with two units of 300,000 tons each in the long term, rather than just constructing one unit. The recent capital increase of 2 billion yuan is interpreted as a signal that practically supports this plan.
The significance of Hualu Hengsheng's expansion plan is not just due to the capacity numbers. Until now, the TDI market has been close to a 'de facto single strong structure' centered around Wanhua Chemical, and Hualu Hengsheng's entry shows the possibility of forming another large axis within China. This suggests that the global TDI market could be restructured into 'a few global companies + large Chinese players.'
The impact of this trend on the market needs to be viewed in the short and medium term. In the short term, the reduction of overseas facilities, regular maintenance, and unexpected operational disruptions are likely to significantly influence prices. In a situation where spare capacity is reduced, even small supply issues can be quickly reflected in prices.
However, in the medium term, the emergence of new capacity in China, including Hualuoheng, seems likely to act as a factor limiting the upper range of TDI prices. Unless demand increases sharply, the market may respond more sensitively to 'expectations of expansion → price adjustment' rather than 'supply shortage → price surge'.
In the long term, the direction is relatively clear. With almost all new TDI projects concentrated in China, the global TDI market is likely to shift its center of production and export to China. This implies that not only price competitiveness but also future risks related to trade, tariffs, and environmental regulations may increase. In other words, supply is concentrated, prices are managed, and risks are likely to shift into the policy domain.
The ISOL trend analysis team would like to summarize the current TDI market as follows.
It is not so much a phase where demand is driving the market up, but rather a phase where capacity restructuring is changing the nature of the market. The expansion of Hualuoheng is more of a signal that the global TDI market is moving to the next stage than just a simple new investment.
In the future TDI market, as much as 'how much demand will increase', who will be the final supplier and how stable that supply is are likely to become increasingly important criteria for judgment. ISOL will continue to track these trends of change.