For some time now, IKO has been facing supply issues for MDI (“isocyanate”), the main raw material for the production of PIR insulation boards.
Not only IKO, but all the manufacturers of PIR insulation materials have been severely affected by this.
The situation has significantly deteriorated over the last few days. We estimate that there is currently a shortage of at least 30% of the MDI that is required to meet the demand.
We expect that this will not change much in the months to come. This situation is unprecedented!
The major petrochemical companies, our MDI suppliers, are currently being affected by a series of unscheduled shut-downs (incidents) of their production plants, and, combined with maintenance work scheduled far in advance, the increase in the demand for MDI (also as a result of the success of PIR high-efficiency insulation), and the delay in the construction of some large MDI factories, this is causing a major and acute shortage of MDI. IKO has been presented with a fait accompli by its suppliers in this matter; a significant shortage of MDI, as well as the exponential increase in the prices of MDI raw materials, virtually on a daily basis.
The combination of all these factors has caused a very exceptional situation, which was completely unforeseeable and which we could not reasonably anticipate or estimate in advance. The impact of the price increases and the scarcity of the raw materials have had a serious impact on our production costs and production volumes. Due to this force majeuresituation, we are unfortunately unable to meet the demand for IKO Enertherm, and are obliged to adapt our sales price to take account of the exorbitant increases in the prices of the raw materials that have taken place at very short notice.
We are well aware that this puts the entire construction process under a lot of pressure.
KO is using all the realistic means available to try to keep the supply of raw materials as smooth as possible, whereby supply has priority over the pricing. Our aim is to be able to deliver to our customers as smoothly as possible. The situation that has arisen will have an impact on the delivery periods, however, as the current scarcity of the raw materials also affects our production capacity, and is completely beyond our control.
Availability will remain our main focus, however. This inevitably implies that, due to the current force majeure situation with which we are confronted, with price increases and scarcity of the raw materials, we must ourselves continuously apply price increases for our products. We also refer to our General Sales and Delivery Terms, which state that price adjustments are possible and that the specified delivery period is always indicative.
IKO will in any case maintain the acknowledged quality of IKO Enertherm at a high level, and will not try to achieve lower prices by compromising on quality.
We hope that this situation will soon stabilise, but, as far as we can estimate at the moment, further price increases will be inevitable in the coming months.
We therefore ask you to take these circumstances into account when planning your construction work and orders.
The management and employees of IKO sincerely apologise for this situation, which has arisen from factors beyond our control, and will make every realistic and feasible effort to guide our partners through this extremely difficult period.
We would advise our direct business contacts to urgently discuss the matter with their customers, indicating the fact of force majeure, and to order in good time (delivery periods have in the meantime already extended to 8 weeks). Please be extremely careful when quoting prices for future projects.
We will keep you informed of further developments.
With kind regards,
IKO Insulations
Dirk Theuns / CEO
