Market and product

SINGAPORE (ICIS)--Spot toluene di-isocyanate (TDI) prices in China have started to stabilise, after falling steeply from early November, as buying activities picked up late last week, market sources said on Monday.

Offers from northeast Asian producers were at $2,350-2,380/tonne (€1,786-1,809/tonne) CFR in Hong Kong, subject to anti-dumping duties (ADD), on Monday, roughly the same or slightly higher than last week’s prices, they said.

Stronger buying interests were noted as the Asian Para Games in Guangzhou was about to draw to a close as market players anticipated that transportation restrictions on TDI, which is classified as a dangerous chemical, would be lifted, they said.

The regional sporting event was held in the southern China city on 12-19 December.

For safety reasons, China restricts the transportation of dangerous chemicals in cities that were hosting major events such as the Asian Games in November, the Shanghai World Expo in May-October 2010 and the Beijing Olympics in 2008.

Tighter control on flows of these chemicals is also being imposed during national celebrations, including the annual Lunar New Year holidays.

A number of south China-based foamers had been hesitant since early November to buy significant TDI volumes because of the strict transport and storage restrictions in south China and stringent checks at the Shenzhen-Hong Kong border.

Regional suppliers had lowered their offers just to liquidate their inventory, market players said.

At this time, however, the market would get a lift on restocking activities.

“We have to bring up our stock level to a comfortable level now. Our storage tanks have been empty for too long,” said a south China-based foamer.

The TDI market may have hit a trough last week, with prices falling to a 20-month low of $2,300-2,370/tonne CFR China Main Port (CMP)/Hong Kong on 15 December, dragged down by domestic China spot prices.

“It is bottom-fishing time! Never was TDI so cheap this year. This is the time for us to stock up some low cost cargoes,” a trader based in Hong Kong said.

“We will ramp up our plant right after the [Asian Para] Games ended because we still have Lunar New Year orders to clear,” said another south China-based foamer in Mandarin.

The recent decline in China’s domestic TDI prices, meanwhile, was opening up opportunities for arbitrage trade to other markets, market players said.

In southern China, prices were assessed CNY1,000-1,300/tonne ($150-195/tonne) lower week on week at CNY19,300-20,500/tonne DEL on 15 December, value-added tax (VAT) excluded.

“We can easily earn some margin after buying some imports here and move it out to other parts of Asia and even to the Middle East and Africa,” said another trader in south China.

Spot TDI prices in southeast Asia, India, Middle East and Africa were mostly discussed at about $2,600/tonne CFR, with Hong Kong/Chinese suppliers offering at $2,500/tonne CFR or below.

“If the arbitrage is effective enough, alongside with more trading activities here, the oversupply situation [in Hong Kong/Mainland China] will ease,” said a trader based in south China, adding that this would firmly stem the decline in TDI prices.