China Market Insider China Aims to Conquer the Global MDI Market

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China's largest MDI producer, Wanhua Chemical, continues to expand its market share. The company already dominates the global MDI market ahead of Covestro and BASF. It will continue to expand its capacities in the coming years, reports the Chinese chemical newspaper Zhongguo Huagong Xinxi Zhoukan. What does this mean for the global market?

Beijing/China – MDI (methylene diphenyl diisocyanate) is an important component of polyurethane foam used, among other things, to insulate refrigerators and freezers. Production is technically challenging, hence only about a dozen producers worldwide are active in this market.

Wanhua Chemical is already the world's largest MDI producer, with a global market share of 23.73 %, ahead of Covestro at 18.86 % and BASF at 18.08 %. The other major producers are Dow (13.22 %), Huntsman (10.96 %), SLIC (6.67 %), Tosoh (4.52 %) and Kumho Mitsui Chemicals (3.96 %). The Chinese Chemical Newspaper cites these figures from a report by the Qianzhan Industrial Research Institute in Beijing.

Big MDI plans for the future

But being the market leader in China and globally is not enough for the Chinese. They have bigger plans. Wanhua Chemical is a corporation listed on the Chinese stock exchange, but behind its largest shareholder is the communist municipal government of Yantai in the Shandong Province. It is thus a kind of ‘modern state-owned enterprise’ with a complicated ownership structure. Nevertheless - the industrial policy wishes of the Beijing leadership are an order for this corporation.

Although all the major manufacturers, including Covestro and BASF, are planning to further expand their MDI capacities in the coming years, by far no one has such big plans as Wanhua. The aim is to further strengthen the ‘voice in the industry’ and thus ‘pricing capabilities’ of the Chinese MDI division, writes the chemical newspaper. In other words, work is being done in a targeted manner and with large government investments to increase competitive pressure on Covestro and BASF step by step. It is an example of the massive problems that the German chemical industry will face in the coming years.

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One-third of the MDI market by 2024

At the moment, Wanhua Chemical has a total annual MDI capacity of 2.1 million tons at three sites, including 1.2 million in Ningbo, 600,000 in Yantai and 300,000 in Hungary. In mid-August, the Group began construction of its fourth site in the Chinese coastal province of Fujian. From around September next year, 400,000 metric tons per year of MDI will be produced there.

At the same time, Wanhua Chemical's existing MDI capacities are to be expanded significantly, namely by an additional 300,000 tons per year in Ningbo, by 500,000 tons per year in Yantai and 50,000 additional tons per year in Hungary. "Wanhua Chemical's global market share will reach 34 %," cheers the Chemical Newspaper. The group aims to achieve this goal—to produce one-third of the global MDI market—as early as 2024. The plan is ambitious because it takes place against the backdrop of an ongoing investment boom in the MDI industry.

Ningbo becomes MDI center

Covestro already produces nearly 500,000 metric tons per year in Shanghai and has announced plans to expand by another 100,000. BASF has two sites in China where it produces the polyurethane base material - in Chongqing in the Sichuan province (400,000 metric tons per year) and in Shanghai (190,000 metric tons per year).In Shanghai, the German chemical company plans to soon produce 50,000 metric tons more per year, as well as 300,000 additional metric tons per year in the United States.

With these plans by the Chinese Wanhua Group, Ningbo, located south of Shanghai on the Hangzhou Bay on the East China Sea, can further consolidate its leadership as the largest MDI location in China. In the ‘Wanhua Industrial Park’ there, the local branch of the Wanhua Chemical Group, together with partners such as the South Korean Hanwha Chemical Group and the German company Linde Gas, has invested a total of 3 billion dollars (20.6 billion yuan).

In Ningbo, once the construction work is completed, 1.8 million metric tons of MDI will be produced per year in the future. By comparison, last year there was a global production capacity of 9.24 million metric tons of MDI per year.

* Henrik Bork, former China correspondent of the German Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency. ‘China Market Insider’ is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

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