January 21, 2022

Changes to MDI production are needed to prevent future MDI supply disruption

NexantECA methylene diphenyl diisocyanate (MDI

The availability of raw materials severely impacted the performance of the global polyurethane industry in 2021. Supply outages and high-cost freight led to difficulties sourcing flame retardants, blowing agents, surfactants, polyols and isocyanates. Availability of methylene diphenyl diisocyanate (MDI) was a recurring issue. The lack of MDI caused prices across the different grades to rise through the first half of 2021 before peaking in September, with only slight decreases in pricing seen in Europe in 4Q2021. 

The lack of availability of MDI in Europe was caused by supply outages and high demand growth that had started in 2H2020. Supply issues began in 1Q2021 as freezing weather in the US Gulf Coast led to electricity shortages, putting producers under force majeure. As the power grid stabilised, chlorine availability was an issue leading to these force majeures continuing for at least half of the year in the region. Given that the same producers have facilities in Europe, some volumes were sent across to fulfil orders as well as take advantage of the higher prices in the region. This meant less volumes were available for European clients in the first half of the year.

Force majeures at BorsodChem, Covestro and Huntsman compounded issues into 2H2021. The lack of availability and high prices for MDI and other raw materials led to delays in orders for new polyurethane processing machinery, and there were reports of demand destruction as users turned to alternative materials.

Overview of current monomeric MDI focused operating philosophy


The primary concern is that the low availability and high prices of MDI will continue, causing demand growth to stagnate. When evaluating the availability of MDI, it is imperative to consider the three major grades: polymeric MDI (PMDI), high functionality polymeric MDI (HFPMDI) and monomeric MDI (MMDI). PMDI is produced in the highest volumes directly from an MDI production facility ready-for-use, while HFPMDI and MMDI are produced together from an MDI distillation facility that takes PMDI from the production facility as a feedstock. For use in a distillation facility, the PMDI composition has higher monomeric content due to changes in the operation of the production facility and is commonly known as crude MDI. The HFPMDI and MMDI are the heavier and lighter components of the crude MDI. In some plants, a single polymeric MDI stream can be used for polymeric MDI end-uses as well as crude MDI feedstock.  After production, these streams are then blended in a tank farm to reach the specifications for the monomeric and polymeric grades sold by each company.

Each is used for different applications as well. PMDI can be considered general purpose and is used in insulation for construction and appliances, automotive foams and some Coating, Adhesive, Sealant, Elastomer (CASE) applications. The major use of HFPMDI is to produce polyisocyanurate (PIR) foam for construction insulation applications. In contrast, the lead application for MMDI is in CASE products. Construction and appliance foams are expected to grow at the highest rates, and therefore PMDI and HFPMDI are expected to see the highest growth going forwards.  

HFPMDI and MMDI are produced in batch distillation facilities averaging lower operating rates than Crude/PMDI manufacturing assets. MMDI demand and crude MDI availability, constrained by polymeric MDI demand, limit operating rates of distillation units. The distillation units operate according to market demand and specifically that of MMDI.  This is because MMDI average prices are higher than HFPMDI, and MMDI has a much shorter shelf life – i.e., MMDI stocks must be kept at a minimum. Its significantly shorter shelf life also means that MMDI ideally is not freighted over long distances, and inter-regional trade is marginal.

MDI availability in 2021 and 2025

Overall, there is sufficient capacity for all grades of MDI in Europe until at least 2025. However, the current operating philosophy for MDI distillation can lead to shortages in PMDI or HFPMDI and MMDI. Producing PMDI reduces the availability of HFPMDI and MMDI and vice versa. It is not possible to increase the availability of all grades simultaneously. The most pressure is put on HFPMDI availability, given that distillation facilities are typically operated in response to MMDI demand. Demand for PIR foam is expected to grow at the highest rates of all types of polyurethane, and the pressure on HFPMDI availability is only expected to increase as PMDI demand is also projected to increase at high rates.  

Overview of changes to distillation facility operating philosophy

To increase the availability of all MDI grades, it would be necessary to have significant overcapacity for PMDI and crude MDI production, increase the capacity and sophistication of blending facilities or modify the operating philosophy of distillation units to allow for greater availability of HFPMDI and MMDI as required by both end-use industries.  

The first option is not cost-effective or commercially sound, impacting producer margins.  Increasing the sophistication of blending facilities by allowing for greater stocks of HFPMDI and other grades would help alleviate the MDI availability issues and would likely be more cost-effective than the first option.  In this case, the financial reward of increased volumes during high demand volatility is likely to outway the cost.  There is currently a low probability of stalling demand growth in the polyurethane market.

The final option is technically feasible as there is sufficient capacity for distillation (operating rates are only at 54 percent currently). Still, it needs careful planning given the limited shelf life of monomeric MDI. Options could include increasing crude MDI for times of high demand or operating the splitter to produce HFPMDI and a blendable ‘low viscosity’ PMDI or blending monomeric MDI back into a ‘high viscosity’ polymeric MDI stream. The ‘high viscosity’ PMDI has less monomeric MDI than conventional polymeric MDI, and blending produces a product like conventional PMDI. 

Into 2022, the supply position is expected to improve as the shortages in 2021 were caused by the combination of an extreme weather event in the United States, three force majeures in Europe and a broader crisis within the supply chain. As a result, the availability of all MDI grades is likely to improve. However, the MDI industry is very exposed to any future disruptions. Such disruptions as with 2021 and the previous price spike in 2018 are likely to cause demand growth to stall temporarily.  Alleviating supply chain disruption is now a major topic within many industries as ‘just-in-time’ manufacturing philosophies have been shown to not work during periods of disruption – arguably when we need these supply chains to be at their most efficient.  There are plenty of options for MDI producers going forward, which may come at a cost but will help improve supply reliability and customer relations.

Find out more...

Market Analytics: Polyurethane Intermediates - 2021 provides analysis and forecasts to 2045 of supply and demand of the global polyurethane intermediates markets.  This analysis identifies the issues shaping the industry as well as provides global capacity listings, with long term demand, supply and net trade forecasts for 40 countries.Products analysed in detail include nitrobenzene, aniline,  methylene diphenyl diisocyanate (MDI) and toluene diisocyanate (TDI). 

Profitability and Price Forecasts: Isocyanates - 2021 provides profitability and price projections to 2045 for isocyanates - methylene diphenyl diisocyanate (MDI) and toluene diisocyanate (TDI). The main price setting regions of Asia Pacific, Western Europe and the United States are analysed.

Nitrobenzene Aniline MDI (2021 Program) is part of NexantECA Technoeconomics – Energy & Chemicals (TECH) program and provides a comprehensive analysis of the technology used within the methylene diphenyl diisocyanate (MDI) industry. The analysis provides cost of production estimates for MDI and its precursors as well as supporting cost estimates for auxiliary technologies. An overview of the sustainability of the value chain is presented, including an analysis of the impacts of carbon taxation and decarbonization on costs.

The Author

Daniel Saxton. Consultant



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