The global polyurethane (PU) industry faces significant uncertainty due to recent U.S. tariff policies, particularly the expansion of Section 232 tariffs on aluminium and steel imports. While these tariffs do not directly target PU raw materials, they indirectly affect production costs, supply chains, and demand across various sectors, including automotive, construction, and upholstered furniture.

Impact on the Global PU Market

The recent tariff hikes on aluminium (from 10% to 25%) and steel (remaining at 25%) have escalated costs in industries reliant on these materials. In the PU industry, rising steel and aluminium prices increase operational costs for producers of polyol and isocyanates, leading to greater volatility in raw material prices, disruptions in the global supply chain and downstream demand.

Effects on Key Sectors

1.    Automotive Industry 

The automotive sector, a major consumer of polyurethane-based materials, is feeling the effects of higher steel and aluminium costs, which raise production costs for vehicle components like seating foams, interior panels, coatings, insulation, and even advanced composites for lightweight vehicles. U.S. automakers are responding by diversifying their supplier base and increasing reliance on domestic suppliers of PU products and raw materials. 

Prioritizing innovations in PU-based composites helps reduce vehicle weight and offset the increasing costs of metals. Manufacturers in Europe and Asia are also adopting localized sourcing to mitigate the effects of tariff increases and enhance supply chain resilience.

2.    Construction Industry 

The construction sector is another significant consumer of PU materials, particularly for insulation, coatings, adhesives, and sealants. It is the most preferred material due to its excellent thermal insulation properties, durability, and versatility in applications ranging from residential buildings to large-scale commercial structures. The rising costs of aluminium and steel, essential for building frameworks, are putting pressure on the construction sector, driving up project expenses. However, demand for PU insulation remains steady due to stringent energy efficiency regulations. 

In the U.S., rising steel and aluminium costs are driving up construction project expenses. However, demand for PU insulation remains steady due to energy efficiency regulations. While these regulations support demand, higher material costs may slow construction growth, leading to delayed or scaled-back projects. In Asia, particularly in China and India, the construction boom continues, with growing demand for locally sourced PU products to offset price increases.

Shifting Supplier Focus 

PU suppliers are ramping up production in Asia to meet the growing demand for construction-related products. Companies like Huntsman, BASF, and Wanhua Chemical are optimizing their production processes and exploring cost-reducing innovations to maintain competitive pricing despite rising raw material costs.

3.    Upholstered Furniture Industry 

As a result of these dynamics, PU suppliers are focusing on high-growth markets in Asia, such as India and Southeast Asia, to meet the rising demand for construction-related products. Companies like Huntsman, BASF, and Wanhua Chemical are expanding production and optimizing processes to stay competitive amid rising raw material costs. In the U.S., furniture manufacturers are dealing with higher aluminium prices, exploring nearshoring and alternative materials. There's also a shift toward sustainable PU foam products, with an emphasis on bio-based polyols. In Europe, the trend toward sustainability is driving the use of bio-based PU materials to meet eco-conscious demand, while rising costs are prompting a search for alternative raw materials.

Innovation by Major Industry Players

Major PU companies are adapting to tariff-induced challenges with strategic shifts aimed at maintaining profitability amid rising raw material costs.

BASF: Expansion and Sustainability

BASF is expanding production in Asia to counteract cost hikes in Western markets, focusing on sustainable PU technologies, such as bio-based polyols, to appeal to eco-conscious consumers. This move helps BASF stay competitive in sectors like automotive and construction, where environmental concerns are rising.

Covestro: Shift to Specialty Products

Covestro is pivoting towards higher-margin speciality PU products to mitigate the impact of fluctuating raw material costs. The company is focusing on premium, high-performance PU solutions for industries like automotive, where lightweight and energy-efficient materials are in demand.

Huntsman Corporation: Partnerships and Innovation

Huntsman is partnering with automakers and construction firms to develop energy-efficient PU solutions, helping offset the financial burden of rising material costs. This includes offering lightweight, energy-efficient foam systems for vehicles and thermal insulation for buildings, aligning with energy efficiency trends.

Dow Chemical: Digital and Circular Economy Focus

Dow Chemical is enhancing supply chain efficiency through digital transformation, reducing costs amid tariff fluctuations. The company is also investing in PU recycling and circular economy initiatives, providing sustainable material options for industries like automotive and construction while reducing reliance on volatile raw materials.