Huntsman idling Europe MDI plant amid lackluster demand, high costs: CEO

Huntsman will idle one of its two Netherlands plants for methylene diphenyl diisocyanate – a key component for polyurethanes -- until demand and economics improve, executives said Feb. 21.

The US company will idle the smaller of its two Rotterdam MDI units for an extended period, said CEO Peter Huntsman during an earnings call. The company has already idled one of its three MDI lines in Geismar, Louisiana, he said.

Huntsman cited higher feedstock benzene prices among the factors for the reduced run rates.

US benzene spot prices have risen by nearly 30% since early January, according to Platts data, and European benzene spot prices are 50% higher than in late November. Peter Huntsman estimated industry operating rates for MDI were around 70% globally, amid weak end-use demand in construction.

However, following the Lunar New Year, the company is seeing improved pricing and demand in China such areas as infrastructure and consumer-facing markets, he said.

China is the world's largest MDI market, accounting for approximately 40% of global capacity and demand, Peter Huntsman said.

"A steadily improving demand situation and potential economic stimulus would be a catalyst for our polyurethanes business," he said.

The company highlighted its exposure to energy-efficiency initiatives, including spray foam insulation, lightweighting for automobiles and electric vehicle components.

As a result, Peter Huntsman expects continued strength in the automotive sector in 2023. Automotive revenues across Huntsman divisions increased by 7% on the year as global supply chains improved and energy-efficient trends gained traction, he said.

"The Chinese automotive continues to be a great business for us, and we're making more and more headways across all of our divisions, particularly into the EV models for that segment of the business," he said.

The aerospace sector also should remain strong, Huntsman said, as airlines continue to increase orders.

"The vast majority of our demand on Aerospace is going to be between Boeing and Airbus, specifically around the Airbus 350, the Boeing 787 and the new wing designs on the 777X," Peter Huntsman said. "Our expectations remain that this important and profitable sector will return to pre-pandemic levels in 2024."

Energy costs

Like most of the manufacturing sector, Huntsman has experienced the effects of record-high energy prices in the past year.

In Europe, energy prices have eased significantly, though Peter Huntsman said this could be due to demand from the industrial sector falling by 25%-30%, which would indicate a "massive deindustrialization."

Huntsman implemented surcharges in 2022 to offset higher energy costs, and those have been transferred into permanent price increases, Peter Huntsman said. He did not rule out further price increases if costs for energy or raw materials skyrocketed again this summer.

"We're not going to continue to be the shock absorber between energy prices, producers and the ultimate consumers," he said.