Stripping off core assets and centralizing equipment maintenance, chemical giant BASF launches a major overhaul

Recently, the chemical industry has witnessed two major events: BASF's 7.7 billion euro coatings asset sale approved by EU antitrust regulators, but regulators required the divestiture of associated polysulfide assets to eliminate monopoly risks; meanwhile, affected by raw material shortages, equipment failures, and concentrated maintenance, European, American, and Japanese manufacturers collectively raised MDI prices. Supported by the sufficient production capacity of domestic leaders, domestic MDI price trends remain independent, with spot prices maintaining narrow fluctuations.

I. 7.7 Billion Euro Coatings Deal Clears Key Approval; EU Grants Conditional Clearance, Mandating Divestiture of Polysulfide Assets

On June 2, the European Commission officially approved BASF's transfer of a majority stake in its automotive coatings business to The Carlyle Group. This approval comes with mandatory binding conditions: Carlyle must divest Nouryon's entire global polysulfide business to a compliant third-party buyer on schedule, with the closing of the transaction deeply tied to the fulfillment of the asset divestiture.

On October 10, 2025, BASF, funds associated with Carlyle, and the Qatar Investment Authority finalized a binding acquisition agreement. The assets include three major segments: OEM vehicle coatings, automotive refinish coatings, and industrial surface treatments. The overall enterprise valuation is 7.7 billion euros (approximately 63.44 billion RMB), with closing planned for the second quarter of 2026. Upon closing, BASF will realize a pre-tax cash gain of 5.8 billion euros while retaining a 40% long-term equity stake in the target company, achieving a light-asset transformation and retaining industrial dividend income. The transaction was officially filed for EU antitrust review on April 8 of this year.

Core Logic Behind EU Antitrust Objections: Polysulfide is an irreplaceable core raw material for aerospace sealants; downstream companies face extremely high costs and long cycles to switch suppliers. Nouryon is one of only two mainstream global producers of polysulfide and holds an absolute market advantage in the field of aviation-grade raw materials. Without asset divestiture arrangements, the new entity would hold dual resources in raw materials and terminal coatings, easily restricting raw material procurement for competing products and stealing competitors' commercial data, thereby forming an industry monopoly. As per the commitment, Carlyle must sell the Nouryon Greiz plant in Germany (the location of all global polysulfide production capacity), supporting intellectual property, partnership contracts, and all incumbent employees as a package, completely clearing the business assets.

Financial report data shows that in 2025, BASF's coatings division generated full-year revenue of 3.746 billion euros and operating profit of 274 million euros, a year-on-year increase of 22.87%. The full-year net loss attributable to shareholders was 18 million euros, further expanding from the previous year's loss of 4 million euros. This is also a significant incentive for BASF to sell assets to optimize its financial statements.

II. Multiple Overseas Factors Trigger MDI Price Hike Wave; European, American, and Japanese Manufacturers Intensify Price Increases

The overseas MDI market entered a comprehensive price hike cycle at the end of May. Leading companies such as Covestro, Huntsman, BASF, and Tosoh successively issued price adjustment notices. Insufficient raw material supply, force majeure at facilities, concentrated maintenance, and rising upstream raw material costs jointly pushed up product quotes.

1. North American Market: Raw Material Failures Combined with Shutdown Maintenance; Three Chemical Giants Successively Raise Prices

Multiple Negative Factors on Supply Side Erupt Simultaneously:

· Covestro declared force majeure for North American MDI due to sudden failures in the carbon monoxide and chlorine units of partner Air Products; raw material recovery time is TBD;

· Dow North American plants are also restricted in operation due to shortages of key raw materials;

· Huntsman US Geismar plant entered phased maintenance, with only two of three production lines operating; maintenance cycle is 3-4 weeks;

· BASF finalized a 45-day major maintenance for its MDI unit in July, simultaneously commissioning the new 200,000 tons/year capacity at Geismar, USA; after the new project launches in Q3, the site's total capacity will reach 600,000 tons/year.

In addition, domestic US C3 and benzene raw material prices rose, and supplies of carbon monoxide and carbon dioxide were tight, compressing the operating load of the entire isocyanate chain. Downstream spray foam enterprises locked in orders and stockpiled goods early to hedge risks, further tightening spot supplies. The industry pricing model shifted from traditional monthly pricing to bi-weekly flexible negotiation. Institutions predict the price rally will continue into the traditional peak demand season of Q3.

2. Japanese Market: Dual Pressure from Geopolitics and Exchange Rates; Japanese Producers Significantly Raise Prices

Affected by Middle East geopolitical disturbances impacting crude oil prices and the continuous depreciation of the Yen, chemical raw material costs rose significantly. Tosoh raised MDI prices by 80 JPY/kg (equivalent to over $500/ton) starting May 1; Covestro Japan simultaneously raised MDI prices by $600/ton. Both companies indicated that if energy and raw material costs continue to rise, factory prices may be raised again.

3. Sudden Failure at BASF India Plant Intensifies Global Supply Disruption

On June 1, news emerged that the 50,000 tons/year MDI separator unit at BASF's Dahej base in Gujarat, India, suffered an unplanned shutdown failure, phase-wise reducing supply to the Asia-Pacific region and further exacerbating the global tightness of MDI spot supplies.

III. Domestic MDI Supply and Demand Pattern Remains Robust with Independent Price Movement, Diverging from Overseas Trends

In sharp contrast to the significant price hikes overseas, the domestic MDI market was stable and fluctuated within a narrow range in early June, with the spread between domestic and foreign prices continuously widening.

· Price Reference: In June, Shanghai Huntsman posted polymeric MDI at 20,000 RMB/ton and pure MDI at 24,600 RMB/ton. As of June 2, the mainstream spot transaction price for domestic polymeric MDI in East China was 17,000~17,500 RMB/ton, and Wanhua Chemical's' ex-factory price for PM-200 polymeric MDI at the Shandong plant was stable at 15,000 RMB/ton.

· Domestic Price Resilience Stems from Capacity Advantages: As the absolute domestic leader, Wanhua Chemical's 700,000 tons/year technical revamp capacity in Fujian came on stream successively in Q2, bringing the company's total capacity to 3.8 million tons/year, approaching a 40% global market share. Supported by partial capacity from Covestro Shanghai and Huntsman Shanghai, overall domestic supply is ample. Meanwhile, the domestic MDI industry has long been in a net export position; manufacturers can flexibly adjust the ratio of domestic and foreign sales to hedge against import shocks from overseas price hikes and stabilize domestic spot fluctuations.

Overview of Existing Annual Capacity of Global Leading MDI Enterprises

Wanhua Chemical 3.8 million tons, BASF 2.07 million tons, Covestro 1.77 million tons, Huntsman 1.37 million tons, Dow 1.11 million tons, Mitsui Chemicals 610,000 tons (expanding to 710,000 tons), Tosoh 470,000 tons, Iran Karoon 40,000 tons. The industry is highly oligopolistic; capacity changes among leading manufacturers directly influence global price trends.