In building construction, rigid polyols are widely used in insulation, structural support, and sealant applications, providing thermal insulation, lightweight support, waterproofing, and soundproofing functions while enhancing safety. Polyurethane coatings are used for exterior waterproofing, interior decoration, and floor coatings, offering weather resistance, aesthetics, and protective features, thus meeting the comprehensive needs of buildings and improving their performance and comfort. Therefore, the sales and construction of buildings have a significant impact on the polyurethane market.
The U.S. housing market remains in an unstable state, with a slight decrease in overall construction and completion numbers, according to Federal Reserve Bank of St. Louis. Housing starts in the US declined by 8% month-on-month and 8.1% year-on-year to 1.434 million in June 2023, below market expectations of 1.48 million. Housing completions for June were at a rate of 1.468 million, showing a month-on-month decrease of 3.3%, but indicating a 5.5% increase year-on-year.
U.S. New Housing Starts & Housing Completions, Jun. 2022- Jun. 2023 (thousands of units)
Data source: Federal Reserve Bank of St. Louis
From the perspective of home sales, recent data from the US housing market has been inconsistent. Data released by the U.S. Department of Commerce show that after experiencing three consecutive months of recovery, new home sales in the US declined for the first time in June, with a total of 697,000 units sold, below the market consensus of 725,000. The previous figure for May also declined significantly from 763,000 to 715,000. New home sales in June fell by 2.5% month-on-month, whereas May had seen a month-on-month increase of 12.2%. Furthermore, the National Association of Realtors (NAR) indicate that due to factors such as high home prices, rising mortgage interest rates, and serious inventory shortages, although existing home sales in May rebounded slightly compared to April, overall sales remained sluggish. Existing home sales in May increased by 0.2% compared to the previous month, marking the second consecutive month of positive month-on-month growth since January 2022. However, the median sales price for existing homes in May was USD 396,100, a year-on-year decrease of 3.1%, representing the largest price decline in over a decade. Additionally, compared to May of the previous year, national home prices in the US were still down by 0.5%, but only 1% lower than the historical peak reached in June of last year.
One of the reasons for the pressure on the US housing market is the continuous increase in mortgage interest rates. In an attempt to curb inflation, the Federal Reserve has embarked on an aggressive cycle of interest rate hikes over the past year. Since March 2022, the Federal Reserve has raised interest rates 11 times, with a cumulative increase of 525 basis points, bringing the target range for the funds rate to 5.25%-5.5%. This has led to a sluggish US economy and pushed 30-year mortgage rates to the highest levels in 20 years, consequently delaying home purchasing decisions and causing the US real estate market to lose its past glory.
The U.S. mattress industry is also likely to decline significantly. The U.S. government has imposed anti-dumping duties on mattresses from 14 countries, including Mexico, the Philippines, Poland, Slovenia, Spain, and Taiwan. This is not the first time that the US mattress industry and related associations have requested such anti-dumping and anti-subsidy measures. As early as 2019, the federal government imposed tariffs as high as 295% on imported upholstered furniture from Vietnam and China. Now, high tariffs have also been imposed on European and South American imports, leading to a sharp decrease in the consumption of mattresses and upholstered furniture.
TDI plays an important role in upholstered furniture, especially in mattresses. As a polyurethane raw material, TDI reacts with polyols to form polyurethane foam, providing mattresses with high elasticity and comfort. Polyurethane foam quickly rebounds, effectively disperses body pressure, alleviates back and joint burden, and offers a better sleep experience. Moreover, TDI-based polyurethane foam exhibits excellent breathability and moisture dissipation, regulating the temperature and humidity of the mattress, keeping it dry, and enhancing comfort. Therefore, TDI enables mattresses to have outstanding elasticity, comfort, and breathability, providing users with improved sleep experience and healthy support.
The US housing market is facing multiple pressures, including a decline in housing starts and completions, unstable home sales performance, and the impact of rising mortgage interest rates on the economy and the real estate market. These factors together have resulted in an unstable trend in the market. In the future, the polyurethane market will continue to experience growths or declines based on the trends in US housing construction and consumer demand.
