Ups and Downs of TDI Inventories
Click:0    DateTime:Aug.26,2020

By Wu Yanni, Sublime China Information Co., Ltd.

TDI inventories (of factories, the same below) rose to a record high in this March, but fell back to a low in June due to surge of sales in April and May.

TDI inventories skyrocketed and prices fell in February and March

Operating rates and inventories fluctuated sharply in the first two quarters of 2020 (see Figure 1 for details). This was obviously different from previous years. Operating rates have been low during May-June in recent two years given routine facility maintenance of Shanghai BASF (with a TDI capacity of 160 kt/a) and Shanghai Covestro (310 kt/a) both in May. The comprehensive operating rate in February-March 2020 was far lower than the same period of last year. TDI factory inventory indexes, relatively high (reaching around 8 000) only in Q4 2019, soared in 2020, partly because of new Xinjiang Heshan Juli Factory but mainly attributable to the coronavirus pandemic, which made TDI downstream firms unable to resume production on time.

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     Figure 1  TDI factory inventory indexes and operating rates during 2019-2020

TDI prices crashed in March 2020 due to factors like high inventories, and could not be stabilized until beginning of April, when the price in eastern China reached RMB9 500/t, down 18% from RMB11 600/t before the Spring Festival (see Figure 2 for details).

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                      Figure 2  TDI prices in the first half of 2020

TDI inventories declined continually in April and May

TDI prices hitting a record low attracted a large number of buyers, and domestic demand jumped as most downstream firms resumed normal operation in March, both greatly reducing pressures on TDI factories, inventories of which showed a downward trend during April-May period. TDI operating rates were low in May as only three firms – Wanhua Chemical Yantai, Gansu Yinguang Chemical Industry Group and Cangzhou Dahua Group – were in normal production. Hence low TDI factory inventory indexes at the beginning of June.

TDI inventories rebounded and operating rates resumed rapidly in June

TDI inventories stopped falling and then rose in June owing to operating rates rapidly rebounding to the previous 71% at the end of June (see Figure 3 for details). But the rates were briefly impacted in July by a 45-day TDI unit overhaul at Wanhua Chemical Yantai.

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Figure 3  TDI factory inventory indexes and operating rates in 2020

Trading volume rose first and then fell in July

Prices of TDI spot goods from Shanghai peaked at RMB11 500/t in June, up 21% or RMB2 000/t from the low point in April, and approaching to the level at the beginning of 2020. Prices falling back at the beginning of July attracted some TDI buyers, but in mid to late this month the prices gradually increased and trading volume remained low.    

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