(Sept. 4, 3:40 p.m. EDT) — Recent pricing increases in thermoplastic polyurethane materials have raised great concern in the industry. Suppliers, buyers and the like are paying close attention in this issue. In this short report, we will attempt to give a brief assessment of the price fluctuation as well as a rough prediction of TPU price movement in the near future.
There are a few factors that helped fuel the instability in recent TPU material prices, but according to our observation, one of the root causes is the pricing volatility of raw ingredients that make up TPU compound.
One of these major raw ingredients is adipic acid, or AA. The main purpose of AA is for the production of nylon. About 85 percent of the AA is being used to produce nylon on the market, and the remaining 15 percent goes into the manufacturing of TPU compound. However, because of the growing global demand for nylon, along with increasing standard-of-living costs in countries such as China, there is an imbalance in the supply of AA, which drives up the TPU material price.
For the past 20 years, the price of AA has been steady at around $1,700-$1,800 per ton, but in this year alone, the price of AA has increased to $2,200-$2,700 per ton during May and June.
Based on the macromarket condition and demand, we predict that the price of AA will peak around August and September of this year. We estimate that the price of AA should fall back to around $2,500 per ton around October.
Another important component of TPU compound is methylene diphenyl diisocyanate, or MDI. MDI is used with isocyanates such as AA (which is one kind of polyester polyol) in the manufacturing of polyurethane. It is the most-produced diisocyanate, accounting for more than 60 percent of the global market in the year 2000. Currently, MDI pricing is around $2,400 per ton.
Nevertheless, within a couple of years, there will be about 150 million tons of production capacity added in Asia. With the increase in production, we anticipate that the MDI price will come back down to around $2,000 per ton.
Currency exchange rates will also play an important role in the development of TPU pricing. It is widely expected that the U.S. dollar will weaken over time against major Asian currencies. The dollar-based costs of goods will decrease as well. This will indirectly help lower the price of TPU compound.
With the movement of the currency exchange rate, along with the stabilizing supply and price of raw ingredients, we should see a gradual decrease in the price of TPU material around 2007.
Yang, who works in sales at Taiwan PU Corp. of Taipei, Taiwan, prepared this column for the firm's All About Polyurethane blog, polyurethane.blogspot.com. It is reprinted with the company's permission.