Mitsui Chemicals Adds 100 Thousand Tonnes of MDI Capacity as Global Industry Rivalry Intensifies

Driven by surging demand for insulation materials, a new round of capacity expansion is taking shape in the global MDI market. A new production line at the Yeosu plant in South Korea is nearing commissioning, marking the quiet escalation of a capacity race among major international chemical producers.

On 15 December, Mitsui Chemicals announced that its joint venture, Kumho Mitsui Chemicals, will add a 100 thousand-tonne-per-year MDI production facility at its Yeosu site in South Jeolla Province. Upon completion in 2027, the company's total MDI capacity will rise to 710 thousand tonnes per annum.

This is not Kumho Mitsui Chemicals' first expansion in South Korea. In 2024, the company commissioned a 200 thousand-tonne-per-year MDI unit at the same site, lifting total capacity to 610 thousand tonnes per annum.

Strategic Expansion Anchored in Demand Growth

Founded in 1989 as a 50:50 joint venture between Japan's Mitsui Chemicals and South Korea's Kumho Petrochemical, Kumho Mitsui Chemicals has long focused on the production of both high-performance and general-purpose MDI. Company executives stated that the latest expansion decision was underpinned by expectations of sustained demand growth.

According to the company, global warming mitigation policies are driving stricter building insulation standards, while economic growth is increasing demand for more comfortable living environments. Together, these factors are expected to push global MDI consumption growth to an average annual rate of approximately 5%.

Cost and Sustainability Advantages

The expansion reflects a clear strategic orientation. The additional capacity will prioritise supply to the automotive sector and to markets requiring highly flame-retardant insulation materials.

Notably, the new project will make use of recycling equipment installed during the previous capacity expansion. This enables simultaneous carbon reduction and energy-saving cost efficiencies, contributing to the establishment of a more sustainable production system. Such cost-control advantages are particularly significant against the backdrop of persistently high energy prices in Europe.

Highly Concentrated Competitive Landscape

The global MDI market remains highly concentrated. Current and planned production capacities among major producers are as follows:

• Wanhua Chemical: 3.8 → 4.5 million tonnes/year (world's largest producer; expansion underway in Fujian)

• BASF: 2.07 million tonnes/year (European capacity constrained by energy costs)

• Covestro: 1.77 million tonnes/year (recently under performance pressure)

• Huntsman: 1.37 million tonnes/year (advancing global restructuring)

• Dow: 1.11 million tonnes/year (reducing capital expenditure)

• Mitsui Chemicals: 0.61 → 0.71 million tonnes/year (announced expansion)

• Tosoh Corporation: 470 thousand tonnes/year

• Iran Karoon: 40 thousand tonnes/year

Among these, Wanhua Chemical's expansion pace stands out. Its Fujian technical upgrade and capacity expansion project will add 700 thousand tonnes per year of MDI capacity, scheduled for completion in the second quarter of 2026. Once operational, Wanhua's global MDI capacity will reach 4.5 million tonnes per year, further reinforcing its industry-leading position.

European Producers Under Pressure

In contrast to the expansion momentum in Asia, European polyurethane producers are facing mounting challenges. Financial disclosures show that BASF, Covestro, Huntsman and Dow all reported weaker performance in the second quarter of 2025.

Year-on-year revenue declines ranged from 2% to 8%, while EBITDA fell more sharply, by between 6% and 53%. Sales volumes were largely flat or slightly lower, while product prices generally declined by 3% to 7%.

According to Founder Securities, persistently high energy costs continue to weigh heavily on European producers. Over the past two years, European isocyanate facilities have frequently encountered force majeure events, often linked to raw material supply disruptions.

Shifting Demand Structure

MDI, a key polyurethane raw material, is widely used across multiple industries. From a demand perspective, refrigerators and freezers represented China's largest downstream market for polymeric MDI in 2023, accounting for more than 50% of total consumption.

Adhesives ranked second at approximately 19%, followed by automotive applications at around 5%. All other sectors each accounted for less than 5%.

Demand in emerging application areas is expanding rapidly. Polyurethane materials offer advantages including elasticity, energy-efficient insulation, lightweight properties and formaldehyde-free adhesion. Driven by demand for environmentally friendly, energy-saving and lightweight materials, polyurethane applications in formaldehyde-free adhesives, lightweight composites and eco-friendly foams show broad long-term potential.

Among these, formaldehyde-free boards represent the fastest-growing new demand segment. By 2026, potential MDI adhesive demand in the formaldehyde-free board market is projected to exceed 570 thousand tonnes.

Capacity Imbalances and Supply Risks

Global MDI production capacity is unevenly distributed, with Europe accounting for nearly one-quarter of total global capacity. Global MDI demand in 2024 is estimated at approximately 8.54 million tonnes, reflecting a compound annual growth rate of around 4% over the past four years.

However, European capacity faces increasing uncertainty. Persistently high energy costs continue to exert pressure, while ageing infrastructure raises the risk of production disruptions. Earlier this year, Covestro declared force majeure at its Dormagen, Germany TDI plant, affecting 300 thousand tonnes of capacity after a fire at an external substation in the chlor-alkali industrial park.

Founder Securities noted that with Europe's energy challenges showing no immediate resolution and North American MDI capacity only sufficient for self-supply, any disruption to European MDI output could push the global market into a tight supply-demand balance.

Industry Restructuring Accelerates

Against this backdrop, Mitsui Chemicals announced on 30 May that it plans to spin off its Basic & Green Materials (B&GM) business — covering petrochemical products including MDI and TDI — around 2027. The move signals a broader portfolio reconfiguration and may pave the way for more independent development of its polyurethane raw material operations.

Other multinational chemical producers are also adjusting their strategies. Huntsman has shut down three downstream polyurethane facilities in Europe and the Middle East, while Dow has closed its European PO plant in an effort to strengthen operational resilience and cost competitiveness.

Mitsui Chemicals' expansion decision reflects the gradual weakening of European MDI capacity alongside steady capacity growth in Asia. As construction accelerates at Wanhua Chemical's Fujian base, targeting an additional 700 thousand tonnes of capacity by 2026, the global MDI market is entering a new phase of competition.

With global MDI demand growing at an annual rate of around 5%, the race among industry leaders has moved beyond near-term market share. Whether these new production lines can align with accelerating building energy-efficiency upgrades and automotive lightweighting trends will shape the next phase of industry restructuring.