Many market participants wondered how the recent wild fluctuations in oil prices would impact prices of polyurethane raw materials.

WTI, also known as Texas light sweet, serves as a benchmark crude, or subject matter, for U.S. crude futures. Crude futures pricing is based on the benchmark crude in major oil producing regions. For example, WTI serves as the benchmark crude for crude futures traded on New York Futures Exchange. WTI is used as a benchmark crude for pricing all crude produced or sold in the United States.

The figure below compares the movement patterns of WTI crude prices and polymeric MDI prices from 2014 to March 11, 2022 (the dark black line represents WTI crude prices). As can be seen from the figure, there is no obvious correlation between the two prices, and the fluctuation in polymeric MDI price was smaller than that in WTI crude price except in 2017. Besides, the recent surge in oil prices had a limited impact on the movement of domestic polymeric MDI price.
Next, we will examine how the movement of benzene and rigid polyols prices impact that of polymeric MDI price.

Crude oil is used to manufacture naphtha through atmospheric and vacuum distillation, which is then used to make benzene through catalytic reforming. Benzene is used by MDI manufacturers as a main raw material for producing MDI through phosgene process.

The figure below shows that the movement of benzene price is more closely correlated with that of polymeric MDI price than that of WTI crude prices, especially during the period before 2017. After 2017, as new MDI capacities in China were put into production gradually, other factors played increasingly roles in determining the movement of polymeric MDI price, especially the dynamics of supply and demand.