Analysis of TDI Development

By Zhang Li, Planning Institute of Petroleum and Chemical Industry

At the end of 2015, China’s toluene diisocyanate (TDI) capacity was 890 kt/a, and output was around 650 kt, not only satisfying domestic demand but also supporting export. Table 1 shows the producers of TDI in China in 2015.
The amount of TDI imported to China was 37 kt in 2015, the export volume was 63 kt and the apparent consumption was 630 kt. The proportion of consumption used for making polyurethane flexible foams was 62%, followed by 12% for coatings, 17% for elastomers and 6% for adhesives.
Polyurethane flexible foams, the major TDI-downstream products, are extensively used in making furniture, automobiles and toys. Their makers’ consumption of TDI used to account for over 70% of the total. Due to slack demand in terminal markets such as household decorative materials and construction materials, however, the market for polyurethane flexible foams shrank somewhat in 2015. The real estate sector started a periodic recovery at the end of 2015 and is hoped to bring about an increase in market demand for the foams. Auto sales were disappointing in 2015. The automotive sector has entered a stage of transition and adjustment during which sales can hardly grow much.
The application of TDI in coatings is regarded as the consumption sector with the greatest potential for growth. The financial performance of the coatings sector was just average in 2015, and its growth slowed down.
Consumption of TDI in making adhesives and sealants is quite small. As TDI has poor yellowing resistance, its consumption in making polyurethane adhesives is not as high as that of MDI. Some adhesive producers choose to use TDI only when the price of MDI is high.
As China’s economy has entered the “new normal” of structural adjustment and slower growth, TDI-related sectors are affected, and TDI demand is quite slack. It is expected that in 2020 the market demand for TDI will be around 900 kt with an average annual growth of around 7.6% during 2015-2020.

Features of TDI production and development in China

With impacts from environmental protection efforts and market demand, China’s TDI capacity increased rapidly from 440 kt/a in 2010 to 790 kt/a in 2012, reaching 890 kt/a in 2014. The average annual growth was close to 20%. Capacity was stable in 2015. It is expected that there will be no new capacity again in 2016. Figure 1 shows the trend of TDI capacity in China in recent years.











There are seven TDI producers in China today. They are concentrated mainly in coastal regions. The capacity of the two production units in Shanghai accounts for 46% of the total. Figure 2 shows the distribution of TDI capacity in China.  The “Conditions for the Admission to the Isocyanate (MDI/TDI) Sector” (Version for Opinion Solicitation) issued by the Ministry of Industry and Information Technology in December 2009 set new thresholds for admission to the MDI/TDI sector. It was specified that the initial scale of a new MDI unit must be 300 kt/a or above (except renovation or expansion projects) and the initial scale of a new TDI unit must be 150 kt/a or above (except renovation or expansion projects). In 2015, the Ministry of Industry and Information Technology set the scale of a new MDI unit at 400 kt/a.
Implementation of the new “Catalogue of Hazardous Chemicals (2015 Edition)” started on May 1, 2015. TDI is downgraded from an acute-toxicity chemical to a hazardous chemical. Procedures for the application and filing of matters related to the use and transportation of TDI will be greatly simplified. The cost of TDI in aspects such as transportation is therefore reduced, so competition in the TDI market will surely become fiercer in the future.
Typical end uses of polyurethane flexible foams are in making bed mats, sofas, clothes linings and automobile seats. Manufacturers of furniture are the most important consumers, taking over 50% of the total. The consumption in making furniture is concentrated mainly in the Yangtze River Delta and the Pearl River Delta. The consumption in clothes linings is concentrated mainly in eastern coastal regions such as Zhejiang, Jiangsu, Fujian, Guangdong and Shandong. As for use in automobile seats, six major automobile industry clusters have been formed – in Northeast China, Beijing/Tianjin/Hebei, the Yangtze River Delta, the Yangtze River’s Middle Reaches, the Pearl River Delta and the Yangtze River’s Upper Reaches – and their output accounts for nearly 80% of the national total. There are more than a dozen producers of polyurethane coatings with a capacity of over 10 kt/a in China. Major ones include Guangdong Huarun Coating Co., Ltd., Shanghai Huasheng Chemical Co., Ltd., Jiangsu Sanmu Chemical Co., Ltd., Shanghai Sanyin Paint Co., Ltd., Guangdong Carpoly Chemical Group Co., Ltd., Wuhan Twin Tigers Coating Co., Ltd. and Hangzhou Paint Co., Ltd. The production of polyurethane coatings is distributed mostly in eastern coastal regions.
Surplus TDI capacity arose in 2011. The import volume of TDI has declined constantly, and the export volume keeps going up. Figure 3 shows the import and export of TDI in China over 16 years.

Weakening profitability of the TDI sector

The market price of TDI peaked in 2012 and has declined steadily since. The drop in 2014 was especially significant. The surplus of capacity, the slowdown of demand growth and the drastic price decline of raw materials have all become major factors in the declining price of TDI. In February 2015, the price of TDI came down to a new low of RMB11 900/t, the lowest in the last 5 years. The average transaction price for the whole year of 2015 was around RMB12 500/t.