Eliza Wong
An electrical fire at Covestro’s Dormagen plant has ignited global TDI market chaos, forcing force majeure declarations on critical chemical supplies while pushing prices to levels unseen in recent years. With one Chinese factory implementing overnight price hikes exceeding 30%, this accident exposes how vulnerable the tightly balanced toluene diisocyanate market remains to supply shocks. As international buyers scramble for alternatives, analysts warn these disruptions couldn’t have hit at a more sensitive moment – just months before the seasonal September peak in polyurethane foam production.
The unprecedented TDI price surge demonstrates:
- How European production instability creates opportunities for Chinese exporters
- Why domestic Chinese manufacturers accelerated expansion timing
- The potential for sustained price volatility through Q3 2024
Covestro Plant Incident Paralyses European TDI Supply Chain
A critical electrical fire erupted in late July at Covestro’s Dormagen manufacturing complex, crippling Germany’s largest integrated chemical facility. The blaze triggered automatic shutdown protocols across multiple units, halting production of:
- Caustic soda (critical feedstock)
- Chlorine gas (essential for TDI synthesis)
- Hydrochloric acid (HCl)
Force Majeure Effects Spread Through Production Lines
The domino effect reached Covestro’s 300,000-ton/year TDI unit, forcing formal force majeure declarations on these chlorine-dependent operations. This marks Covestro Germany’s second major TDI disruption since August 2022, when a chlorine leakage at the same facility caused shortages lasting through December that year.
Covestro’s Head of European Production Martin Karsten (马丁·卡斯滕) confirmed recovery timelines remain uncertain, telling industry portal Chemical Week: “These incidents demonstrate how integrated production requires cross-unit stability. There will be significant supply constraints through late summer.”
TDI Price Surge Rewrites Market Economics
Within days of the Dormagen shutdown, global TDI markets underwent seismic shifts. China’s Longzhong Information Consulting reports unprecedented pricing movements:
- Prices in East China leaped over 15% week-on-week
- Average spot prices reached $1,940/ton ($14,000/ton RMB)
- Daily producer quotes moved northward $44-$66/ton
Single-Day Price Records Shattered
The most jaw-dropping movement emerged when a North China producer adjusted July direct sales prices by over 30% within 24 hours – raising allocation commitments from ¥14,000 to ¥18,500 ($1,850-$2,570) per metric ton. Experts link this extreme movement to:
- Anti-dumping tariff expectations post-Q3
- Strategic positioning before seasonal demand uptick
- Limited spot availability elsewhere
Export Surge Positions China as Global Market Stabilizer
China’s TDI exporters capitalized swiftly on Europe’s capacity gap. Latest China Customs data shows:
- May exports reached 51,600 tons – highest monthly volume ever recorded
- Year-over-year export growth approaching 100%
- 2024 YTD shipments climbing toward forecasted 400,000 tons
Source: General Administration of Customs of China
Competitive Advantages Reshape Global Trade Flows
The TDI price surge accelerated China’s expansion into European markets. Wanhua International VP Jeremy Zhang (张增括) noted: “Logistics improvements now enable China-to-Europe shipments within 30 days. Combined with our ¥3,000/ton ($420) cost advantage, this reshuffles purchasing priorities.” Industry consensus underlying China’s export momentum includes:
- Consistent production stability
- Faster order-to-delivery fulfillment
- Expanding India and Middle Eastern demand
Major Producers Strategize Around Supply Disruptions
The market upheaval accelerated capital deployment decisions among global leaders:
- Wanhua Chemical currently operates 1.11 MMT/year capacity
- Soon commissioning Fujian’s second 330k ton TDI train
- Cangzhou Dahua maintains 160k tons/year production
Greenfield Expansion Pipeline Develops Rapidly
Most significantly, Shandong-based Huaglu Hengsheng secured permits for its Jingzhou industrial park:
- 300k ton/year TDI complex slated for 2026 commissioning
- Upstream DNT unit self-sufficiency feature
- Integrated acid recovery system minimizing waste
Sustained Price Volatility Expected Through 2024
The coincidence of European production problems timed immediately before seasonal stocking cycles creates ideal conditions for continued TDI price surge conditions:
- Polyurethane producers initiate August pre-stocking
- Europe dependent on Asia/Pacific imports through Q3
- Historical spread patterns remain disrupted
Buyers Face Strategic Dilemmas
Covestro customers report difficult sourcing choices:
- Integrating Chinese imports requires formulation adaptation
- Premium pricing threatens thinner-margin applications
- Smaller buyers face quota limitations
Short-term scarcity is undeniable, yet macroeconomic clouds loom, as Evonik Industries CFO Simon Huang (黄志昌) cautions: “Demand-side questions exist around Chinese property market exposure. Countervailing forces could emerge once supply recovers.”
Future Market Structure Highlights China Dominance
Current disruptions will likely solidify Asia’s position as TDI’s production epicenter:
- European capacity likely constrained long-term
- Chinese expansions bringing 470k+ annual tons online
- Export infrastructure improvements accelerating
The TDI price surge revealed how profoundly global capacity redistribution has advanced since 2020, with China now positioned as both the largest producer and increasingly, the supplier of last resort when Western facilities falter.
If anything, Covestro’s misfortune serves as a harbinger for continued market instability. Business contingency planners across foam-dependent industries must reevaluate supply chain partnerships today. Inventory buffers remain critical during this transitional period.
