Introduction Chinese MDI Market Declined with Narrowed Fluctuations in 2022 Q1-Q3PMDI: 

In the first half of 2022, under the impact of lingering COVID-19 epidemic and strict control measures, “triple pressures” China’s economy faced – demand contraction, supply shocks and weakening expectations – increased further. Both supply and demand in China declined. Downward pressure of China’s macroeconomy continued to rise, especially in the real estate industry, which secured less investment, and further led to a weak downstream demand for PMDI. As a result, China’s PMDI market moved down from January to August. Later, with the seasonal demand improvement and supply tightening, PMDI prices stabilized and rebounded slightly in September. As of October 17, the mainstream offers for PMDI stand around CNY 17,000/tonne, an increase of about CNY 3,000/tonne from the low point of CNY 14,000/tonne before the rebound in early September.

MMDI: China’s MMDI market remained range-bound from January to August 2022. Compared with the past two years, MMDI price fluctuations this year were relatively weaker and affected by both the supply and demand. In late August, the concentrated purchases of main downstream manufacturers resulted in a general shrinkage of multiple suppliers’ spot goods. From September to mid-October, the supply shortage still existed, thus MMDI prices were going up steadily. As of October 17, the mainstream offers of MMDI stand around CNY 21,500/tonne, an increase of about CNY 3,300/tonne compared with the price of CNY 18,200/tonne in early September.

China’s Macroeconomic Situation and Outlook

China’s economy picked up in the third quarter. Both production and consumption grew in July and August. However, affected by recurrent epidemics in more than 20 cities of China, and power outages in some areas due to hot weathers, the economic growth was actually limited compared with the low base of the same period last year. With the support of special bonds and various policy financial instruments, infrastructure investment accelerated to increase, but the investment in real estate sector continued to decline, and the investment growth in manufacturing sector slowed quarter-on-quarter.

2022 Q4 Market Outlook:

China: On September 28, 2022, Li Keqiang, member of the Standing Committee of the Political Bureau of the Central Committee of the Communist Party of China and premier of the State Council of the People’s Republic of China, attended a meeting on government work regarding economic stabilization for the fourth quarter of this year. “It is the most important period throughout the whole year, and many policies are expected to play a greater role during the period. The country must seize the timeframe to anchor market expectations and ensure the full implementation of policies so that the economy runs within an appropriate range”, Premier Li said. Generally speaking, the domestic demand recovery depends on the continuous significant effect of economic stabilization policies and the optimization of epidemic prevention measures. China’s domestic sales are expected to maintain an uptrend, but the growth may be weaker than expected. Investments will increase moderately, and infrastructure investment may continue to grow rapidly, which will offset some pressure brought by the reduction in manufacturing investment and the downturn in real estate sector.

Global: In the first three quarters of 2022, unexpected factors such as Russia-Ukraine conflict and related sanctions brought a huge impact on global politics, economy, trade, energy, finance and many other fields. The stagnation risk increased significantly worldwide. Global financial market fluctuated sharply. And the geopolitical pattern accelerated to collapse. Looking forward to the fourth quarter, the global geopolitical pattern is still complicated, including intensified Russia-Ukraine conflict, worldwide inflation and interest-rate hikes, as well as Europe’s energy crisis, which may trigger global economic recession. Meanwhile, the CNY exchange rate against the US dollar has broken “7″ again after more than two years. China’s foreign trade is still under considerable downward pressure due to weak external demand.

The global pattern of MDI supply and demand is volatile as well in 2022. Especially in Europe, the MDI market is withstanding severe shocks – tight energy supply, rising inflation rates, high production costs, and reducing operating rates.

In summary, China’s MDI demand is expected to recover moderately, and demand in major overseas markets may shrink in Q4 2022. And we will keep track of the operating dynamics of MDI faiclities worldwide. 

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