Alarm for TDI Capacity Surplus in 2011    

By Zhang Baohui and Zhang Zhanying, ChemChina Cangzhou Dahua Group

China consumes around 25% of the world's toluene diisocyanate (TDI). TDI is mainly used in flexible polyurethane (PU) foams, PU elastomers, coatings and adhesives. The application in flexible PU foams is the most extensive, accounting for more than 80% of the total. Coatings come next at around 16.7%.
   China's TDI production facilities have been constructed on the basis of imported technologies. Due to differences in production technology, products differ considerably in downstream application sectors. TDI produced with the BASF process has high recognition in flexible PU foams and PU elastomers and also has successful applications in the paint/coatings market. TDI produced with the Swiss process is used in flexible PU foams and less in making paints/coatings. With improvements in technology, TDI produced with this process is also getting into the paints/coatings sector today.
   In various application sectors, the growth of demand for TDI in PU elastomers has been quite rapid in recent years and is expected to reach 15% a year. The growth of demand in flexible PU foams has stabilized at around 8% a year. The demand growth in coatings and adhesives has been maintained at 7% a year. The flexible PU foam manufacture will still be the major driver for the consumption of TDI in China in the next few years.
   With impacts from the financial crisis, the growth of TDI demand slowed down in the first half of 2008. Nevertheless, the Chinese government increased the export rebate rate for furniture in June 2008. The economy of the United States, the biggest user of China-made furniture, gradually shook off recession. Also, ASEAN signed a free trade agreement with China. The export of furniture from China has therefore been stimulated and has become a major driver for the restorative growth of TDI demand in the flexible PU foam market. In addition, the rapid development of the automobile sector and the sustained briskness of the housing sector have also greatly promoted the restorative growth of TDI demand from flexible PU foam makers.
   Due to the expansion of the TDI capacity in China, less and less TDI has been imported since 2005. China imported 96 800 tons in 2008, a drop of 24.75% from the previous year. The import volume picked up in 2009, but was still far lower than the level in 2004 and 2005. The amount imported was only 57 300 tons in the first half of 2010, a drop of 21% from the same period of last year. China will still be a net importer of TDI in 2010.
   It is expected that the apparent consumption of TDI in China will reach around 470 000 tons in 2010. With the drive toward a greener environment, advanced countries and regions in America and Europe are taking a cautious attitude towards the construction of chlorine product units. The production and the sales of TDI will continue to shift to Asia.
   With the constant popularization of automobiles and the gradual stabilization of the housing sector, the demand for TDI in flexible PU foams tends to grow steadily in China. Rapid development by leaps and bounds can hardly be expected however. The growth of the TDI consumption will therefore been contained to a certain extent. It is expected that the demand for TDI in China will continue to increase in the next few years and the overall demand will maintain an annual growth of around 9%. The demand for TDI in China is expected to reach around 800 000 tons in 2015.
   With the completion of two 50 000 t/a TDI units by Cangzhou Dahua Co Ltd and CNGC Liaoning Beifang Jinhua Polyurethane Co Ltd in 2009, the supply and the demand of TDI in China are basically balanced with a slight supply shortage in 2010.
   As the demand for TDI in China is in a rising period, many companies intend to get involved and the six existing producers are also expanding. The 250 000 t/a TDI unit of Bayer MaterialScience (Shanghai) Co Ltd will start production at the end of 2010. A 100 000 t/a TDI project of Cangzhou Dahua Co Ltd will be completed and put on stream at the end of 2011. A 50 000 t/a TDI project of Yantai Juli TDI Co Ltd already started construction at the beginning of this year and will be completed at the end of 2011. China's capacity of TDI will therefore increase drastically and the supply/demand status will reverse fundamentally. The 250 000 t/a TDI unit of Bayer, in particular, uses the advanced vapor-phase phosgene process. Compared with the solvent process in popular use today, Bayer can invest 20%-30% less, cut energy consumption by 40%-60% and reduce solvent consumption by 80%. The production cost, therefore, is also very competitive.
   The production and demand of TDI around the world has already reached an overall balance. China, however, is expected to enter a period of capacity surplus from 2011 and the prospect of the TDI sector will be full of worries.
   To upgrade the level of the isocyanate sector, promote its stable and sound development and avoid low-level redundant construction, China's Ministry of Industry and Information Technology has a plan to set the entry threshold for the initial capacity of a new TDI unit at 150 000 t/a. Enterprises who intend to construct TDI units in China should therefore be very careful in making decisions so as to avoid risks.

Production and consumption of TDI in China
                        (thousand tons)
Year    Production    Import    Export    Consumption
2003    35.0    183.9    2.0     216.9
2004    53.0    245.7    7.6     291.1
2005    70.0    237.5    7.5     300.0
2006    180.0    162.6    6.1     336.5
2007    244.0    128.4    8.4     364.0
2008    312.0    96.8    14.4    394.4
2009    305.0    130.1    5.0     430.1
Source: CNCIC

Chinese major TDI producers
            thousand t/a
Company                                                                      Capacity    Capacity    Expansion
  in 2010    in 2011     plan
BASF Shanghai
    160     160     to 300
Gansu Yinguang Chemical Industry Group
    100     100     +200
Cangzhou Dahua Co Ltd
    80      150     +100
BlueStar Chemical Co Ltd
  &nbs