An Overall Analysis of China's Polyurethane Industry   

By Huang Maosong and Jia Runping, Shanghai Institute of Technology

In 2011, due to global economic turmoil, the growth of China's polyurethane (PU) industry slowed down slightly but still remained steady. For the year, PU output is estimated to have reached about 7 million tons.


Review of raw material markets in 2011

Toluene diisocyanate (TDI)

In 2011, domestic TDI prices were basically on a downward track. In March, affected by the Japanese earthquake, Mitsui's 120 000 t/a TDI unit had to stop production, resulting in soaring TDI prices internationally. Further, due to the double impact of domestic macro-control policies and international financial crisis, the downstream demand for TDI in China had been growing slowly. As a result, domestic TDI overcapacity became prominent, and domestic TDI prices plummeted. Since Bayer's 250 000 t/a TDI plant in Shanghai was put into operation in August, the domestic oversupply of TDI became especially serious. Even in the usual peak sales season, September and October, domestic TDI prices kept declining.
   
Diphenyl methane diisocyanate (MDI)

In the Chinese market, MDI is now mainly supplied by Yantai Wanhua PU Co Ltd, BASF, Bayer, Dow Chemical, Huntsman, NPU (Nippon PU Industry Co Ltd), Mitsui Chemicals and Kumho Mitsui. In recent years, due to China's rapidly growing market demand for MDI, many domestic and foreign MDI producers plan to increase their MDI production capacity here. For example, in 2011 Bayer announced plans to expand its existing MDI plant in Shanghai from 350 000 t/a to 400 000 t/a build another MDI plant there, capable of 500 000 t/a. Upon completion, its Shanghai MDI production base will be the world's largest. Hence it is believed that China's MDI market will become very fiercely competitive.

Isophorone diisocyanate (IPDI)

In 2011, Bayer MaterialScience AG announced plans for an IPDI plant in Shanghai Jinshan Chemical Industry Park, to be put into operation in 2015.
   
Propylene oxide (PO)

For domestic PO manufacturers, the year of 2011 was a "bumper harvest" year. Domestic PO imports dropped sharply, the capacity of domestic industrial consumers grew, and the PO plant of Shanghai Gaoqiao Petrochemical Co Ltd was shut down, constantly pushing PO prices to new highs, which in turn provoked complaints from buyers. Since October however, the domestic supply and demand has been changing radically, leading to a sharp decline in PO prices.

Polyether polyols (PEPO)

China can make nearly 3 million t/a of polyether polyols, but domestic consumption is less than 2 million t/a. In 2011, the domestic polyether polyols market was basically cost-driven. Due to high costs, manufacturers' profits shrank sharply. Bayer MaterialScience AG announced plans to produce PU-purposed polyether polyols from carbon dioxide within the next five years and to market the PU for use in mattresses and car interiors. Wanhua Rongwei PU Co Ltd completed the technological transformation of its 50 000 t/a rigid foam-purposed polyether polyols plant.

1,4 - Butanediol (BDO)

In 2011, domestic BDO prices went up and down dramatically like a roller coaster, first rising from RMB19 300 /t in January to nearly RMB23 500 /t at the end of April, and then falling in May and June. In mid-June, it dropped to RMB20 300 /t. But it then rebounded and hit a record high of RMB25 500 /t in September. However, in October it began a steady fall. Currently, global BDO output is 1.6 million t/a. In the USA, the supply and demand of BDO is basically balanced. But Europe is afflicted with an oversupply of BDO and has become a major exporter of BDO. Asia, especially China, has the fastest-growing demand for BDO and is the main importer of BDO.

Polytetrahydrofuran ether glycol (PTMEG)

In 2011, Sinopec Yizheng Chemical Fiber Co Ltd began to build a 46 000 t/a PTMEG plant. Despite sluggish downstream demand and dramatically fluctuating BDO prices, PTMEG prices did not go up and down like BDO prices but kept relatively stable.

Adipic acid (AA)

Throughout 2011, AA "injured" most of its dealers. In the first half of the year, when is usually a peak season for AA sales, the prices of AA kept falling. But in mid-June and July, which is off-season for AA, the prices rebounded vigorously. In early and mid-August, AA prices began to decline again. In September and October (another peak season), AA prices kept declining, and in November and December, AA prices continued to fall.

3,3-Dichloro-4,4-diamino diphenyl methane (MOCA)

MOCA is generally used as a cross-linking agent and a chain extender for PU elastomers. A 10 000 t/a MOCA plant, the world's largest one, was formally put into operation in Jiangsu province on September 27, 2011.


Downstream demand will continue to grow

   * PU foam
In the long run, the application of PU foam in automotives, upholstered furniture and white goods will benefit from the 12th Five-Year Plan and will maintain rapid growth. In China, although the growth of the domestic auto market has slowed down, the export of cars keeps increasing. According to the China Automobile Industry Association data, in the first eleven months of 2011, China's export of cars increased by 274 900 units compared to the previous year, contributing 65.43% to the growth of the domestic auto market in the same period. In the first eleven months, the national output of upholstered furniture totaled 38.841 million pieces, up 4.07% year on year (yoy). In the fourth quarter of 2011, the domestic upholstered furniture market bottomed out. In the full year of 2011, the national upholstered furniture output might grow 4% to 5% annually. In the area of white goods, according to statistics, domestic refrigerator output is expected to grow about 19% in 2011; and the cumulative output of household freezers in the first eleven months reached 17.9 million units, up 12.2% yoy.

   * Synthetic leather
According to the China Plastics Processing Industry Association's forecast, the demand for synthetic leather and artificial leather in China in 2011 to 2014 will grow more than 10% annually. More specifically, the demand for high-performance PU synthetic leather will grow 19.75% annually, and the demand for microfiber leather will grow 0.56% annually.
   Developers of synthetic leather products will focus on functional PU synthetic leather, including flame-retardant resin, shape memory resin, high-permeability resin, fire-, water-, oil- and static-proof resin, self-cleaning resin, durable resin, solvent-free synthetic leather, water-based PU synthetic leather and TPU synthetic leather, and will also focus on expanding applications.

   * Coatings
In 2011, the output of architectural coatings in China continued to grow fast. In the year, China started constructing 10 million affordable homes for its middle- and low-income citizens. In the next five years, the country will build a total of 36 million affordable homes. This will certainly greatly boost the demand for exterior wall coatings.
   PU coatings have been widely used in woodware, buildings, automotives, ships, household appliances, railways, highways and many other areas. In 2011, the demand for PU coatings in China is expected to exceed 1 million tons. It is highly encouraged to develop environment-friendly water-based PU coatings for woodware and high-performance corrosion-proof PU/polyurea coatings and to promote the application of such coatings on high-speed rail, urban rail traffic, wind energy, solar energy and photovoltaic industries.

    * Spandex
In recent years, the terminal consumption of spand