Price trend

Recently, the price of methanol, a raw material, has surged due to geopolitical premiums, and the formaldehyde market followed suit.

According to data from SunSirs' commodity market analysis system, as of March 4, the average price of formaldehyde in Shandong was 1,055 RMB/ton, a 3.05% increase since the Spring Festival.

Driving Factors

1. Cost-driven

Methanol is the main raw material for formaldehyde production, accounting for over 90% of the cost. Following the Spring Festival, tensions in the Middle East escalated. Iran, a major global methanol exporter accounting for over 60% of China's methanol imports, faced limited operating rates at its methanol plants and blocked export channels, leading to a tight methanol supply and a significant price increase. This rise in methanol prices directly increased formaldehyde production costs, providing a floor for formaldehyde prices.

On March 4th, the benchmark price of methanol on the SunSirs website was 2,548.33 RMB/ton, a significant increase of 16.58% after the Spring Festival holiday.

2. Supply and Demand Fundamentals

On the supply side: Formaldehyde production facilities gradually restarted after the Spring Festival, but the industry's overcapacity situation remained unchanged, and the supply side had strong adjustment capabilities. As temperatures rose, companies' production enthusiasm increased, and supply gradually increased, but overall supply was relatively loose, which somewhat constrained price increases.

On the demand side: Formaldehyde is mainly used in adhesives, wood-based panels, and other industries. After the Spring Festival, downstream companies gradually resumed operations, leading to a recovery in demand. However, demand growth in end-user sectors such as real estate was slow, limiting its impact on overall formaldehyde demand. The recovery in demand was relatively slow, making it difficult to quickly absorb the increased supply. The supply-demand balance still needs time to adjust.

3. Market Sentiment and Expectations

Tensions in the Middle East led to a rise in methanol prices, which had boosted sentiment in the chemical sector and raised market expectations for formaldehyde prices. However, due to weak supply and demand fundamentals in the formaldehyde industry, market sentiment had limited impact on prices, and price fluctuations are more influenced by actual supply and demand changes.

Overall Assessment

Formaldehyde prices in March are likely to show a volatile but slightly upward trend, but the upside potential is limited. In the short term, rising methanol prices and expectations of demand recovery will drive formaldehyde prices up, but the increase may be limited by ample supply and slow demand growth. If the situation in the Middle East escalates further and the methanol supply gap widens, formaldehyde prices may rise further; if the situation eases or demand recovery falls short of expectations, prices may face downward pressure.

It is recommended to pay attention to the development of the situation in the Middle East, the trend of methanol prices, and the recovery of downstream demand in order to grasp market dynamics.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.