Polyurethane industry: high access, heavy accumulation
Development History of Polyurethane Industry
Polyurethane (PU) is a polymer resin formed by the condensation polymerization of basic chemicals isocyanate and polyol. Polyurethane has the advantages of high strength, abrasion resistance, tear resistance, good flexural performance, oil resistance and good blood compatibility. It is widely used in household, household appliances, transportation, construction, daily necessities and other industries, and is an important engineering material. In 1937, German chemist Bayer used the polyaddition reaction of 1,6-hexamethylene diisocyanate and 1,4-butanediol to make linear polyamide resin, which opened the research and application of polyamide resin. During World War II, Germany has established a polyamide experimental plant with certain production capacity. After World War II, the United States, Britain, Japan and other countries introduced German technology to start the production and development of polyurethane, and the polyurethane industry began to develop worldwide. my country has independently researched and developed polyurethane resin since the 1960s, and has now become the world’s largest producer and consumer of polyurethane.
Polyurethane is divided into polyester type and polyether type. Polyurethane monomer structure is mainly determined by upstream raw materials and target properties. Polyester type is formed by the reaction of polyester polyol and isocyanate. It belongs to rigid structure and is generally used to produce foamed sponge, topcoat and plastic sheet with high hardness and density. Polyether type is obtained by the reaction of polyether type polyol and isocyanate, and the molecular structure is soft segment. It is generally used in the production of elastic memory cotton and shock-proof cushion. Many current polyurethane production processes remix polyester and polyether polyols in proportions to ensure moderate product flexibility. The main raw materials for polyurethane synthesis are isocyanates and polyols. Isocyanate is a general term for various esters of isocyanic acid, classified by the number of -NCO groups, including monoisocyanate R-N=C=O, diisocyanate O=C=N-R-N=C=O and polyisocyanate etc.; can also be divided into aliphatic isocyanates and aromatic isocyanates. Aromatic isocyanates are currently used in the largest amount, such as diphenylmethane diisocyanate (MDI) and toluene diisocyanate (TDI). MDI and TDI are important isocyanate species.
Polyurethane industry chain and production process
The upstream raw materials of polyurethane are mainly isocyanates and polyols. The midstream primary products include foam plastics, elastomers, fiber plastics, fibers, shoe leather resins, coatings, adhesives and sealants and other resin products. The downstream products include household appliances, home appliances, transportation, construction, and daily necessities and other industries.
The polyurethane industry has high barriers to technology, capital, customers, management and talent, and the industry has high barriers to entry.
1) Technical and financial barriers. The production of upstream isocyanates is the link with the highest technical barriers in the polyurethane industry chain. In particular, MDI is considered to be one of the bulk products with the highest comprehensive barriers in the chemical industry. The synthetic process route of isocyanate is relatively long, including nitration reaction, reduction reaction, acidification reaction, etc. Phosgene method is currently the mainstream technology for industrial production of isocyanates, and it is also the only method that can realize large-scale production of isocyanates. However, phosgene is highly toxic, and the reaction needs to be carried out under strong acid conditions, which requires high equipment and process. In addition, isocyanate compounds such as MDI and TDI are easy to react with water and deteriorate, and at the same time, the freezing point is low, which is a great challenge to production technology. 2) Customer barriers. The quality of polyurethane materials will directly affect the performance of products in various downstream industries. Different customers will not easily change suppliers after determining their own product characteristics, so it will form barriers to new entrants in the industry. 3) Management and talent barriers. Facing the scattered product model demands of downstream customers, the polyurethane industry needs to formulate a complete set of sophisticated procurement, production, sales and service systems, and at the same time, it needs to cultivate high-level professional practitioners with rich production management experience and high management barriers.
MDI Quotes: Demand recovers, high energy costs may limit overseas supply
MDI historical price trend and cyclical analysis
Domestic MDI production began in the 1960s, but limited by the level of technology, domestic demand mostly relies on imports and prices are high. Since the beginning of the 21st century, as Wanhua Chemical gradually mastered the core technology of MDI production, production capacity expanded rapidly, domestic supply began to affect prices, and the cyclicality of MDI prices began to appear. From the observation of historical prices, the price trend of aggregated MDI is similar to that of pure MDI, and the upward or downward cycle of MDI price is about 2-3 years. 58.1% quantile, the weekly average price increased by 6.9%, the monthly average price decreased by 2.4%, and the year-to-date decrease was 10.78%; pure MDI closed at 21,500 yuan / ton, at the 55.9% quantile of the historical price, with a weekly average price increase of 4.4 %, the monthly average price fell 2.3%, and the year-to-date increase was 3.4%. The price transmission mechanism of MDI is relatively smooth, and the high point of the price is often the high point of the spread. We believe that this round of MDI price upward cycle starts in July 2020, mainly related to the impact of the epidemic and overseas force majeure on the operating rate. The average MDI price in 2022 is expected to remain relatively high.
From the historical data, there is no obvious seasonality in MDI prices. In 2021, the high price of aggregated MDI will appear in the first and fourth quarters. The formation of the high price in the first quarter is mainly due to the approaching Spring Festival, the decline in the industry operating rate and the concentration of downstream manufacturers before the festival. The formation of price highs in the fourth quarter mainly comes from the cost support under the “double control of energy consumption”. The average price of aggregated MDI in the first quarter of 2022 was 20,591 yuan/ton, down 0.9% from the fourth quarter of 2021; the average price of pure MDI in the first quarter was 22,514 yuan/ton, up 2.2% from the fourth quarter of 2021.
MDI prices are expected to remain firm in 2022. The average price of aggregated MDI (Yantai Wanhua, East China) in 2021 will be 20,180 yuan/ton, a year-on-year increase of 35.9% and the 69.1% quantile of the historical price. In early 2021, extreme weather overseas frequently occurred, the epidemic affected export transportation, and overseas MDI prices rose sharply. Although MDI prices are currently slightly higher than the historical median, we believe that this round of MDI price upward cycle has not yet ended. High oil and gas prices support the cost of MDI, while new MDI production capacity in 2022 is limited and the overall supply is still tight, so prices are expected to remain firm.
Supply: Steady expansion, limited increase in 2022
Wanhua Chemical’s production expansion pace is significantly faster than that of international competitors. As the first domestic company to master the core technology of MDI production, Wanhua Chemical has become the world’s largest MDI producer. In 2021, the total global MDI production capacity will be about 10.24 million tons, and the new production capacity will come from Wanhua Chemical. Wanhua Chemical’s global production capacity market share has reached 25.9%. In 2021, the total domestic MDI production capacity will be about 3.96 million tons, and the output will be about 2.85 million tons, an increase of 27.8% compared with the output in 2020. In addition to being affected by the epidemic in 2020, domestic MDI production has maintained rapid growth in recent years, with a CAGR of 10.3% from 2017 to 2021. From the perspective of the pace of global expansion in the future, the main increase will still come from Wanhua Chemical, and the domestic expansion project will be put into operation earlier than foreign countries. On May 17, according to the official website of Shaanxi Chemical Construction, Gao Jiancheng, the company’s party secretary and chairman, was invited to attend the Wanhua Chemical (Fujian) MDI project promotion meeting, and signed a construction progress plan responsibility letter with Wanhua Chemical (Fujian) to ensure Achieving the production target of the project on November 30, 2022.
Demand: The growth rate is higher than the supply, and building insulation materials and formaldehyde-free boards bring new growth
Global MDI demand growth is expected to outpace supply growth. According to Covestro data, the global MDI supply in 2021 is about 9.2 million tons, with a CAGR of 4% in 2021-2026; the global MDI demand is about 8.23 million tons, with a CAGR of 6% in 2021-2026. According to Huntsman data, the global MDI capacity CAGR is 2.9% in 2020-2025, and the global MDI demand CAGR is about 5-6% in 2020-2025, of which the production capacity in Asia will increase from 5 million tons in 2020 to 2025 6.2 million tons, the polyurethane industry is optimistic about the MDI demand in the next five years.
Still optimistic about the long-term export situation of MDI. From the perspective of the export structure in 2021, the United States is the main exporter of my country’s MDI, and the export volume in 2021 will reach 282,000 tons, a year-on-year increase of 122.9%. Zhejiang, Shandong and Shanghai are the main exporting provinces (regions) in my country, of which Zhejiang’s export volume reached 597,000 tons, a year-on-year increase of 78.7%; Shandong’s export volume reached 223,000 tons, a year-on-year increase of 53.7%. According to the downstream real estate data, the sales volume of new housing in the United States is going through a post-epidemic recovery period, domestic real estate investment may experience marginal changes, and the recovery in real estate demand is expected to boost MDI demand.
The gross profit margin of Wanhua Chemical in the quarter has a good match with the price spread of aggregated MDI in the quarter. The main raw material of MDI is aniline. Through the calculation of the theoretical price difference, it can be found that the price of polymerized MDI has a good transmission mechanism, and the high price is often the high price difference. At the same time, the price spread of aggregated MDI has a good match with the gross profit margin of Wanhua Chemical in the quarter, and the change of gross profit margin in some quarters lags behind the change of price spread, or is related to the inventory cycle of enterprises.
High energy costs may continue to limit overseas MDI supply. Xinhua Finance, Frankfurt, June 13th, German energy regulator Klaus Müller, head of the Federal Network Agency, said that the Nord Stream 1 Baltic Pipeline will carry out maintenance in summer, and the supply of natural gas from Russia to Germany and Western Europe will be reduced during the summer. likely to drop significantly. Europe’s MDI production capacity accounts for about 30% of the world’s total. The continued tight supply of fossil energy may force overseas MDI manufacturers to reduce their load, and domestic MDI exports may usher in an increase in summer.
Wanhua has obvious cost advantages. Judging from the historical average price of crude oil/natural gas and the cost of sales of major polyurethane companies, the trend of sales cost of overseas companies is closer to that of crude oil and natural gas prices. Wanhua Chemical’s expansion rate is higher than that of overseas companies, or the impact of raw material costs is weaker than that of overseas companies. overseas companies. From the perspective of industrial chain layout, Wanhua Chemical and BASF, which have a petrochemical industrial chain and have more obvious integration advantages, have more cost advantages than Covestro and Huntsman.
Against the background of soaring energy prices, the advantages of integration are getting more and more attention. According to Huntsman data, by 2024, the company plans to realize a cost optimization project of US$240 million, of which the optimization of the polyurethane plant area will contribute about US$60 million in cost reduction. According to Covestro, the increase in revenue from integration projects will amount to 120 million euros by 2025, of which cost optimization projects will contribute around 80 million euros.
TDI market: Actual output is lower than expected, and there is ample room for price upside
TDI historical price trend and cyclical analysis
The production process of TDI is relatively complicated, and the product has higher toxicity and is flammable and explosive than MDI. From the historical price observation, the price trend of TDI and MDI is similar but the fluctuation is more obvious, or it is related to the instability of TDI production. As of June 17, 2022, TDI (East China) closed at 17,200 yuan/ton, at the 31.1% quantile of historical prices, with a weekly average price increase of 1.3%, a monthly average price increase of 0.9%, and a year-to-date increase of 12.1%. From a cyclical point of view, the up or down cycle of TDI prices is also about 2-3 years. Compared with MDI, TDI prices and costs fluctuate more violently, and prices are more susceptible to force majeure and other news in the short term. This round of TDI upward cycle may start from April 2020, which is mainly related to the poor stability of TDI installations and the lower-than-expected actual output. Compared with MDI, the current price of TDI is at a historically low level, and the upside may be more obvious.
TDI prices are expected to continue to rise in 2022. The average price of TDI (East China) in 2021 is 14,189 yuan/ton, an increase of 18.5% year-on-year, and is at the 22.9% quantile of the historical price. The high point of TDI prices in 2021 was in the first quarter, mainly due to the fact that downstream manufacturers stocked up before the holiday, overseas equipment and maintenance supply was limited, and the industry inventory was at a low level in the year. The average price of TDI in the first quarter of 2022 is 18,524 yuan/ton, an increase of 28.4% from the fourth quarter of 2021. Compared with MDI, the price of TDI is still at a low level in history, and there is a large room for price upside.
Supply and demand pattern: long-term tight balance, equipment stability affects actual output
At present, although the global TDI production capacity is excessive, the growth rate of demand exceeds the growth rate of supply, and the long-term supply and demand pattern of TDI may maintain a tight balance. According to Covestro data, the global TDI supply is about 3.42 million tons, with a CAGR of 2% in 2021-2026; the global TDI demand is about 2.49 million tons, with a CAGR of 5% in 2021-2026.
Under the background of overcapacity, manufacturers cautiously expand production. Compared with MDI, TDI has fewer capacity expansion projects, and there is no capacity increase in 2020 and 2021. The main increase in the next two years will also come from Wanhua Chemical, which plans to expand the 100,000 tons/year capacity in Fujian to 250,000 tons/year. The project includes a nitrification unit of 305,000 tons/year, a hydrogenation unit of 200,000 tons/year, and a photochemical unit of 250,000 tons/year; after the project reaches production, it is expected to produce 250,000 tons of TDI, 6,250 tons of OTDA, 203,660 tons of dry hydrogen chloride and hydrochloric acid. 70,400 tons. According to the official website of Fuqing Municipal People’s Government, the expansion project has obtained the TDI installation substation and distribution station, the TDI installation cabinet room construction license, and the TDI refrigeration station construction license. It is expected to be put into operation in 2023.
Poor equipment stability affects the actual output. According to Baichuan Yingfu data, the domestic TDI output in 2021 will be about 1.137 million tons, corresponding to an annual operating rate of about 80%. Although the global TDI production capacity is relatively excess, in 2021, TDI facilities at home and abroad will be affected to varying degrees by extreme weather, raw material supply and technical failures, the actual output will be lower than expected, and the industry inventory will continue to decline. According to Baichuan Yingfu, on June 9, 2022, affected by the strike of local truck drivers in South Korea, the local Hanwha TDI equipment (50,000 tons per set) was reduced in load, and the delivery of Kumho MDI sources was delayed, which affected the recent polyurethane goods to a certain extent. to port. At the same time, many factories are expected to overhaul in June, and the overall supply of TDI is tight.
According to Baichuan Yingfu data, the actual consumption of TDI in 2021 will be about 829,000 tons, a year-on-year increase of 4.12%. The downstream of TDI is mainly sponge products such as upholstered furniture. In 2021, sponge and products will account for 72% of TDI consumption. Since 2022, the growth rate of TDI demand has slowed down, but as the downstream such as upholstered furniture and textiles gradually recover from the epidemic, TDI consumption is expected to continue to grow.
ADI and other specialty isocyanates: new and emerging markets
The ADI market in the coatings field is gradually opening
Compared with aromatic isocyanates, aliphatic and alicyclic isocyanates (ADI) have the characteristics of strong weather resistance and less yellowing. Hexamethylene diisocyanate (HDI) is a typical ADI, which is colorless or slightly yellow, and is a low viscosity, pungent odor liquid at room temperature. As a raw material for the production of polyurethane, HDI is mainly used in the production of polyurethane (PU) varnishes and high-grade coatings, automotive refinish coatings, plastic coatings, high-grade wood coatings, industrial coatings and anti-corrosion coatings, as well as elastomers, adhesives, textile finishing agents, etc. In addition to oil resistance and wear resistance, the obtained PU coating has the characteristics of non-yellowing, color retention, chalk resistance, and outdoor exposure resistance. In addition, it is also used in paint curing agent, high polymer adhesive, low temperature adhesive for printing paste, collar copolymer coating, fixed enzyme adhesive, etc. Isophorone diisocyanate (IPDI) is also a widely used ADI. As a raw material for the production of polyurethane, IPDI is suitable for the production of polyurethanes with good light stability, weather resistance and excellent mechanical properties. Particularly suitable for the production of elastomers, waterborne coatings, polyurethane dispersants and photocurable urethane-modified acrylates.
Some raw materials are imported, and the price of ADI is generally higher than that of MDI and TDI. Taking HDI with the highest market share among ADIs as an example, hexamethylenediamine is the main raw material for HDI production. Currently, 1 ton of HDI is produced and about 0.75 tons of hexanediamine is consumed. Although the localization of adiponitrile and hexamethylene diamine is continuing to advance, the current production of HDI still relies on imported adiponitrile and hexamethylene diamine, and the overall product price is relatively high. According to the data of Tiantian Chemical Network, the annual average price of HDI in 2021 is about 85,547 yuan/ton, a year-on-year increase of 74.2%; the annual average price of IPDI is about 76,000 yuan/ton, a year-on-year increase of 9.1%.
Wanhua Chemical has become the second largest ADI producer in the world
The production capacity of ADI has been expanded steadily, and Wanhua Chemical has made breakthroughs in HDI and derivatives, IPDI, HMDI and other products. According to the data of Xinsijie Industry Research Center, the total production capacity of the global ADI industry will reach 580,000 tons/year in 2021. Due to the high barriers to entry in the industry, there are few companies in the world that can produce ADI on a large scale, mainly including Covestro, Evonik, BASF in Germany, Asahi Kasei in Japan, Wanhua Chemical, and Rhodia in France, among which Covestro is the world’s largest ADI supplier with an annual production capacity of 220,000 tons, followed by Wanhua Chemical with an annual production capacity of about 140,000 tons. With Wanhua Ningbo’s 50,000-ton/year HDI plant put into production, Wanhua Chemical’s ADI production capacity will be further enhanced.
Special and modified isocyanates continue to achieve breakthroughs. At present, my country’s traditional aromatic isocyanates (MDI, TDI) are in the leading position in the world. Among the aliphatic isocyanates (ADI), HDI, IPDI, HMDI and other products have mastered independent production technology, XDI, PDI and other special isocyanates have entered the pilot stage, TDI -TMP and other modified isocyanates (isocyanate adducts) have made important technological breakthroughs. Special isocyanates and modified isocyanates are important raw materials for the production of high-end polyurethane products, and play an important role in upgrading the structure of polyurethane products. With the continuous advancement of domestic technological breakthroughs, Wanhua Chemical and other companies have also achieved breakthrough technological achievements in the fields of special isocyanates and isocyanate adducts, and are expected to lead the world in the new track.
Polyurethane enterprises: strong rebound in performance in 2021, optimistic about the market outlook
Wanhua Chemical
Founded in 1998, Wanhua Chemical is mainly engaged in the R&D, production and sales of a full range of polyurethane products such as isocyanates and polyols, petrochemical products such as acrylic acid and ester, functional materials such as water-based coatings, and specialty chemicals. It is the first company in my country to own MDI It is an enterprise with independent intellectual property rights of manufacturing technology, and it is also the largest polyurethane supplier in the Asia-Pacific region and the most competitive MDI manufacturer in the world.
The production capacity scale has a significant advantage, and it attaches importance to R&D and innovation first. As of the end of 2021, Wanhua Chemical has a total production capacity of 4.16 million tons/year of polyurethane series products (including 2.65 million tons/year for MDI projects, 650,000 tons/year for TDI projects, and 860,000 tons/year for polyether projects). As of the end of 2021, Wanhua Chemical has 3,126 R&D personnel, accounting for 16% of the company’s total, and has invested a total of 3.168 billion yuan in R&D, accounting for about 2.18% of its operating income. During the reporting period of 2021, Wanhua Chemical’s sixth-generation MDI technology was successfully applied in Yantai MDI plant, achieving a stable operation of 1.1 million tons per year; the self-developed hydrogen chloride catalytic oxidation chlorine production technology was fully mature and finalized, and was shortlisted for Chemical Week Best practices for sustainable development in 2021; self-developed large-scale PO/SM, continuous DMC polyether technology and new series of aromatic polyester polyols have been successfully industrialized, and the product indicators have reached the level of superior products.
Wanhua Chemical’s growth is better than that of international competitors. Benefiting from the advantages of scale and cost, Wanhua Chemical’s year-on-year revenue growth in 2021 is significantly higher than that of international competitors, and the operating revenue in the first quarter of 2022 will maintain a high growth rate. With the further emergence of scale advantages and the continuous improvement of MDI exports, Wanhua Chemical will continue to expand the market share of MDI and create multiple growth points in the petrochemical and new materials sectors. (Report source: Future Think Tank)
BASF (BASF)
BASF SE is the world’s largest chemical company with more than 160 wholly-owned subsidiaries or joint ventures in 41 countries in Europe, Asia and the Americas. Headquartered in Ludwigshafen, Germany, the company is the largest comprehensive chemical product base in the world. The company’s business covers health and nutrition (Nutrition & Care), coatings and dyes (Surface Technologies), basic chemicals (Chemicals), high-performance plastics and precursors (Materials), resins and other performance materials (Industrial Solutions), agriculture (Agricultural Solutions) Solutions) and other fields, in which isocyanates (MDI and TDI) belong to the monomer segment (Monomer) in the high-performance plastics and precursors segment (Materials), and the total production capacity of BASF isocyanate (MDI+TDI) in 2021 is about 2.62 million tons. According to BASF’s 2021 annual report, coatings and dyes are the company’s largest revenue segment, accounting for 29% of its revenue in 2021. R&D investment is about 296 million euros, including acquisitions and other investments of 1.47 billion euros; high-performance plastics and The precursor segment (Materials) is the segment with the second largest revenue share, accounting for 19% of revenue in 2021, and R&D investment of about 193 million euros, including acquisitions and other investments of 709 million euros.
The Chinese market is getting more and more attention. According to BASF data, by 2030, two-thirds of the global chemical increment will come from China, and 9 of the 30 expansion projects disclosed in BASF’s 2021 annual report are located in my country. BASF’s Guangdong (Zhanjiang) integrated base is BASF’s largest overseas investment project so far. According to the EIA disclosure, the total investment of the project is about 55.362 billion yuan, of which construction investment is 50.98 billion yuan. The project is scheduled to start construction in the first quarter of 2022, and will be completed and put into operation in the third quarter of 2025, with a total construction period of about 42 months. After the project is completed and put into operation, the average annual operating income will be 23.42 billion yuan, the average annual total profit will be 5.24 billion yuan, and the average annual total net profit will be 3.93 billion yuan. It is expected that the normal production year of this project will contribute about 9.62 billion yuan of industrial added value each year.
Post time: Aug-23-2022