1, Peaked in April and bottomed in June: The first shock reshaped market sentiment
Following the outbreak of geopolitical shocks in late February, Asia's PU isocyanate market has embarked on its second upward cycle. The first rally was collectively driven by supply disruptions in the Middle East, heightened volatility in crude oil and feedstock prices, logistical constraints, plant shutdowns, force majeure incidents, and navigation risks in the Strait of Hormuz. As one of the world's most vital energy shipping lanes, the Strait of Hormuz plays a pivotal role in the circulation of crude oil, petroleum products and liquefied natural gas (LNG). Accordingly, any disruptions are swiftly passed through to petrochemical cost expectations and cargo shipping risks. Against this backdrop, prices of TDI and PMDI across major Asian consuming markets climbed rapidly and hit the peak of the first round in April. Subsequently, amid a phased easing of regional tensions, progress in negotiations between the United States and Iran, falling crude oil prices, improved navigation conditions in the Strait of Hormuz, and persistently sluggish downstream demand, the market entered a correction phase. By the first half of June, prices had retreated to near-bottom levels, and buyers reverted to a cautious purchasing pattern based solely on rigid demand. Nevertheless, tensions escalated again in July, shifting the overall market sentiment once more. The previous price correction is no longer regarded as steady recovery, but rather a brief pause between two rounds of geopolitically driven price shocks.
2, July Tensions Escalate: Supply Chain Risks Return as the Core Pricing Driver
The risk backdrop for the second price rally is broader and more intricate than that of the first. In July, the temporary ceasefire arrangements turned fragile and regional conflicts flared up once again, substantially eroding market confidence in a de-escalation of tensions. Besides renewed strains on the Strait of Hormuz, navigation risks at the Bab el-Mandeb Strait linking the Red Sea and the Indian Ocean have brought fresh logistical burdens to Asian markets. Meanwhile, regional unrest shows signs of further proliferation, with potential risks spreading toward the Caspian Sea and attacks targeting key oil and gas infrastructure, which have further boosted the market risk premium. For PU isocyanates, the impacts extend far beyond crude oil prices and freight rates alone. The market is repricing a basket of compound risks: raw material uncertainties, rising logistics costs and ocean freight, tightening regional spot supply, prolonged shipping schedule lead times, and stricter quotation practices adopted by suppliers. Whereas the first rally was largely fueled by sudden panic, supply outages and cost shocks, the second rally has fully priced in the risks of prolonged and expanding geopolitical disruptions. As a result, market sentiment in India and Southeast Asia has turned more defensive. Even though downstream demand has not fully rebounded, buyers are prioritizing secured cargo deliveries for September shipments above all else.
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