Shin-Etsu makes a major entry into HDI/IPDI/HMDI: Changes are coming to the high-end polyurethane market

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Recently, several key projects undertaken by Sinohchem in regions such as Shandong, Zhejiang, and Tianjin have received approval for environmental impact assessments. These projects cover high-value areas such as advanced specialty engineering plastics, synthetic fragrances, aliphatic isocyanates, and core raw materials used in the production of nylon 66. The total investment in these projects exceeds 5 billion yuan. Among them, the most notable development is the official approval for a project to produce 110,000 tons per year of HDI, IPDI, and HMDI aliphatic isocyanates. Leveraging the company’s existing phosgene and hydrogen cyanide production facilities sowie the accompanying POX/PSA gas systems, this project creates a complete integrated industrial chain that goes from basic chemical raw materials to isocyanate monomers and derivatives, thereby enabling direct entry into the high-end polyurethane market. I. HDI triggers a wave of domestic production expansion, reshaping the global landscape 1. Aliphatic isocyanates such as HDI and IPDI are essential core materials used in high-end original automotive paints and repair coatings, protective coatings for wind turbine blades, adhesives for photovoltaic backplanes, and packaging materials for new energy storage devices. They are also crucial materials in the industries related to new energy and high-end manufacturing. For a long time, the global market for high-end aliphatic isocyanates has been highly concentrated, with a few multinational companies such as Covestro, Evonik, and Asahi Kasei playing a dominant role. China is highly dependent on imports for high-end polyurethane raw materials; this not only results in high procurement costs but also poses risks to supply chain security. 2. Shin-Nakano has designated its base in Weifang, Shandong as the core location for the production of HDI/IPDI new materials. It plans to carry out phase two, three, and four construction projects. By making use of the existing phosgene and hydrogen cyanide facilities at the plant, peak load management will be achieved; meanwhile, dedicated storage areas, production workshops, and accompanying gas processing facilities will be built to create a fully self-sufficient and controllable entire industrial chain for aliphatic isocyanates. 3. Other plans: (1) After Wanhua Chemical acquired Converge, its HDI production capacity became the highest in the world; there is still a project with a capacity of 100,000 tons per year under construction ； (2) Meirui New Materials’ current production capacity is 100,000 tons per year, with a long-term target of reaching 300,000 tons per year ； (3) Dongfang Shenghong officially announced plans to build a project with an output of 50,000 tons per year of HDI and 150,000 tons per year of TDI ； (4) The environmental impact assessment public notice for Jiangsu Yangnong’s 100,000 tons/year HDI project has been completed. According to statistics, the total planned production capacity of HDI in China that is set to come online exceeds 500,000 tons. Over the next 3–5 years, China will shift from being a net importer of HDI to a major global exporter, resulting in a fundamental reversal in the global supply landscape. II. Shinhecheng’s investment in IPDA to complete the closed-loop IPDI industry chain 1. While developing HDI, IPDI, and HMDI, Shinhecheng has also planned a project to produce 25,000 tons per year of isophorone diamine (IPDA), thereby completing a key link in the IPDI industry chain. IPDA is a high-barrier fine chemical intermediate; it serves as the core raw material for IPDI production and can also be used as a curing agent for epoxy resins. It finds application in high-end composite materials, heavy-duty anti-corrosion coatings, wind turbine blades, adhesives, and other fields. Global production capacity has long been concentrated in European and American companies such as Evonik, Covestro, and BASF, with Evonik being the largest supplier worldwide. Most of the production is used for internal needs, resulting in limited quantities available for sale outside. 2. Due to constraints in the supply of isophorone raw materials and high-pressure hydrogenation processes, it is extremely difficult to enter the IPDA industry. As Wanhua Chemical achieves integration across the entire production chain, coupled with the establishment of a 25,000-ton/year IPDA production capacity by Xinhecheng, the process of replacing imported IPDA with domestically produced versions is accelerating significantly. This will enable the domestic IPDI industry to rely on domestic sources rather than foreign ones, thus reducing dependence on imports. III. IPDI and HMDI remain in a monopoly situation; unlike the rapid expansion in the HDI sector, IPDI and HMDI still constitute typical oligopolistic markets with extremely high industry barriers. 1. The total global production capacity for IPDI is approximately 140,000 tons; only five companies worldwide – Evonik, Covestro, BASF, Corbion, and Wanhua Chemical – possess the capability to produce it on a large scale, resulting in a high degree of concentration in the supply side ； In terms of the consumer market, Europe accounts for 65%, while China and the United States together account for around 35%. Domestic demand is continuing to grow, but supply is significantly constrained. 2. HMDI is also dominated by three major manufacturers: Covestro, Evonik, and Wanhua Chemical. The key barriers lie not only in the requirements regarding phosgene production facilities and strict safety controls, but also in the three core processing steps of upstream high-pressure hydrogenation, highly corrosive phosgenation reactions, and high-vacuum distillation for separation, as well as in the control of intermediate purity; it is difficult for new entrants to overcome these barriers quickly. 3. Since 2026, fluctuations in energy prices, coupled with rising costs of raw materials such as MDI and TDI, have further increased production costs. Currently, the prices of HDI and IPDI remain high: the domestic price for HDI monomer is 46,000–51,000 yuan per ton, while that for the trimer is 48,000–52,000 yuan per ton ； The mainstream domestic price for IPDI is 54,000–59,000 yuan per ton; prices will remain strong until the newly added production capacity is fully utilized. IV. Industry Trends 1. Wanhua Chemical leads the global production capacity thanks to mergers and acquisitions as well as capacity expansion. Companies such as Meris Materials, Dongfang Shenghong, and Jiangsu Yangnong continue to increase their investments. Xinhéchéng, on the other hand, leverages its advantages in upstream raw materials to build integrated cost and technical barriers. Entering the HDI/IPDI/HMDI market represents a key step in its transformation into a high-end fine chemicals and new materials platform company. 2. Over the next three to five years, as the planned production capacity of over 500,000 tons is gradually realized, China will become the most important global production and supply center for high-end polyurethane raw materials. Competition in this industry will shift from merely expanding production capacity to a comprehensive competition based on technical barriers, supply chain coordination, cost control, and product stability.