On the morning of March 16, as the US attacked Kharg Island, Iran's oil export hub, tensions between the US and Iran continued to escalate, causing crude oil prices to briefly surge to $106 per barrel in early trading. On the evening of March 13, US President Trump posted on social media stating that the US military had launched "fierce airstrikes" against military targets on Kharg Island, Iran's oil export hub. Relevant analysis points out that the Middle East situation continues to dominate market trends; transportation through the Strait of Hormuz is obstructed, and energy and chemical product prices continue to rise. Previously, Trump released some signals for a ceasefire, but Iran's requirements for ceasefire were too high, leading to a continued stalemate between both sides. The G7 is considering releasing strategic crude oil reserves; the US has approved the release of strategic reserves, but this is difficult to fully offset the decline in transportation volume through the Strait of Hormuz. In the short term, oil prices will remain high. - NBD (National Business Daily)
China's MDI Market Review: Surge Followed by Retreat, Market Divergence Pushes Trading Volume Higher
Affected by continuous international volatility, at the opening on March 9, China domestic polymeric MDI market offers continued upward trend, surging to a high of CNY 17,500-18,000/tonne. Starting from the afternoon of March 10, the market corrected and oscillated. The main reason was the divergence in sentiment among holders of low-cost sources taking profits, but multiple parties bought at low prices, pushing up the turnover volume in the market (on March 12, the market transaction price range even expanded to CNY 15,500-16,900/tonne). On the evening of March 12, international oil prices rebounded again, and simultaneously, sell orders in the trade market were largely released. On March 13, the polymeric MDI market stabilized, driving transaction prices back up. As of March 16, the reference quote for drummed polymeric MDI in China is CNY 16,800-17,000/ton. Compared to the market price before the escalation of US-Iran conflict on February 27, it has increased by CNY 2,800/ton, with a cumulative increase of 20%.
China Polymeric MDI Market Outlook: High-Level Oscillation, Easy to Rise but Hard to Fall
If recent geopolitical conflicts do not show substantial easing, the price of domestic polymeric MDI in this round is expected to break through CNY 18,000/tonne. However, if the situation eases, future prices may consolidate at a high level in the range of CNY 17,000-17,500/ton. The strong drive from the cost side is most significant, and market sentiment is also more influenced by the current unstable situation.
Cost-Side Drive: Crude Oil Premium Has Not Fully Dissipated
The core raw material for MDI production is benzene, which is directly linked to crude oil. The surge in crude oil prices from early March to present has pushed up benzene prices significantly. On March 13, the market price for benzene in China was increased to CNY 8,300-8,400/tonne. Compared to CNY 6,060-6,120/ton on February 27, the cumulative increase is 37%, which was more than the increase of polymeric MDI market (20%). As long as navigation through the Strait of Hormuz has not fully recovered or Middle East tensions persist, the high-risk premium of crude oil will firmly support the cost bottom line for MDI.
Supply-Side Pattern: MDI Manufacturers Raise Prices One After Another, Limited Import Supplement
Stimulated by the sharp rise in upstream petrochemical raw material and energy prices, and expectations of a steep increase in production costs, MDI suppliers successively raised supply prices last week. Wanhua's fixed price for mid-March, BASF's listed price for March, and Covestro's fixed price all saw weekly increases reaching CNY 2,000/tonne.
Regarding imported sources, Kumho Mitsui Chemicals (Korea) and Tosoh (Japan) have no offers, both plants have maintenance shutdown plans scheduled during April-May, leading to cautious tightening of current supply. The Sadara plant in the Middle East has reduced production and exports are blocked, supplying only the local Middle East market. Overall, recent cargo supplements from the three major import sources are very limited.
Demand-Side Game: Resistance to High Prices & Preventive Stockpiling
The significant rise in various raw material prices since early March has notably suppressed downstream manufacturers' willingness to purchase at high levels. If the situation continues to ferment and raw material prices continue to surge, it will severely compress the operating profits of downstream enterprises, potentially slowing down production enthusiasm or pace. Downstream enterprises with rigid demand will consider preventive stockpiling.
Market Sentiment and Capital Aspect
Global commodity markets, including China, are currently in "war premium" mode. Any news regarding an escalation of the blockade in the Strait of Hormuz will instantly ignite market bullish and speculative sentiment. From the perspective of the polymerized MDI market, although high prices will inhibit the release of downstream demand, the average cargo cost within the current market has shifted upwards. Even if the situation eases, the market will remain in a phase of high-level oscillation.