2010-06-17 [Source: Pudaily]

PUdaily, Shanghai-During the short Dragon Boat Festival, bleakness continues in the southern TDI market. Transaction prices for imports without invoice have no suspense to tumble to RMB 22000/ton while some home-made materials are running to RMB 22000/ton with delivery as well. Although most downstream clients have agreed that feedstocks are relatively cheaper and profitability of sponge and furniture products is high, they would like to keep small procurement volumes each time with anticipation of much lower prices in the future as it is still the "buyers' market" for the moment.

For Chinese manufacturers, most TDI factories complain that TDI prices have been conducted below the production costs and claim to reduce production so as to guarantee prices but this measure is not put into operation yet. For one hand, most factories would not like to decrease in output to dissipate its market shares; on the other hand, the losses of reduction or shutdown will be much higher.

Seen from the international environments, although US dollar becomes weak and Euro-rate has rebounded to 1.22, TDI prices set by Euro in Eurozone are not seen decline due to its abundant supply in Europe but it triggers USD price decline in Middle-East and Africa, thereby, some Japanese and Korean suppliers have to make concession in the exporting prices to such regions.

In late June, TDI facilities in Japan and Korea will end its maintenance and restart production while the purchasing ability's decline from its largest TDI consumption-China will lead to the inventory pressure in the coming one to two months.

Furthermore, Korean Won again US dollar exchange rate has depreciated to 1220, which brings some space for Korean suppliers to lower TDI USD prices and by the force of high inventory, Korean suppliers' inclinations to reduce prices are clearly seen. It is expected that in late June or early July, TDI USD prices will run at USD 2500/ton for Korean materials.

Encountering constant price decline in the last several months, inventories at downstream clients' hand are low while large inventory pressure mainly focus on producers and large agents and distributors.

It is estimated that in the coming days after the Dragon Boat holiday, TDI market will welcome a new round of stock-up when prices for home-made and imports without invoice running to RMB 21000/ton and inventories will be transferred from sellers to large and medium sized clients. Whether the price of RMB 21000/ton will be the low point in the forthcoming months is of uncertainty yet.