According to the Business Society Spot News, in the second half of April, the formaldehyde market showed a trend of high-level decline and fluctuating weakness. As of April 27th, the average formaldehyde price in Shandong Province was reported at 1386 yuan/ton, a decrease of 4.74% from the middle of the month and still at a high level for a year.
Driving factor analysis
1. Weakening of cost support: Weakening of raw material methanol prices
The core raw material of formaldehyde is methanol, and its price trend directly determines the cost line of formaldehyde. In the second half of April, the domestic methanol market was affected by expectations of loose supply and demand, resulting in price fluctuations and weakened prices. In some regions, the ex factory price of methanol fell, directly compressing the cost support of formaldehyde enterprises. When the cost of raw materials loosens and the bargaining power of downstream buyers increases, it forces formaldehyde companies to lower their prices to match cost changes, which is an important fundamental factor in the current round of formaldehyde price decline.
2. Continued weakness on the demand side: downstream demand for artificial board industry significantly decreases
The core downstream applications of formaldehyde are in the building materials industry such as artificial boards and adhesives. The core drag of this round of market downturn is the significant contraction of demand in the downstream artificial board industry. In mid to late April, artificial board companies were affected by the sluggish demand in the terminal real estate and home decoration markets, resulting in a sustained low operating rate and a significant reduction in the purchase of formaldehyde. As the May Day holiday approaches, downstream enterprises generally have no intention of stocking up before the holiday, and the procurement pace only maintains the replenishment of essential needs. The market transaction lacks support for large volume, and the driving force for price increases is completely lost.
3. The weak situation cannot be changed by reducing the supply side, and enterprises offer discounts to control inventory during shipment
Although some formaldehyde companies have proactively adjusted their operating loads and reduced their on-site supply to a certain extent, the supply reduction is still difficult to effectively boost the market due to the cliff like weakening of the demand side. Under the dual pressure of low demand and accumulated inventory, many formaldehyde factories in China have been forced to adopt a strategy of discounted shipments, accelerating inventory turnover by lowering prices and expanding discounts, maintaining controllable inventory levels, and directly exacerbating the downward pressure on market prices.
Market forecast:
The short-term decline has slowed down, with weak fluctuations being the main trend. Short term demand is difficult to quickly recover, and there is insufficient stocking demand before the holidays. Enterprises will continue to offer discounts for shipments; However, the previous decline has partially absorbed the bearish sentiment, and low-priced goods may attract a small amount of essential replenishment. The space for further significant price drops is limited, and the market is mainly fluctuating at a low level. Attention should be paid to the trend of raw material methanol, downstream demand recovery, and supply side adjustment efforts.
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