According to SunSirs Spot Market Watch, the landscape of the formaldehyde market underwent a shift during the latter half of May, exhibiting a trend of rebounding after bottoming out—thereby completely reversing the continuous downward trajectory observed since April. As of May 26, the average price of formaldehyde in the Shandong region stood at 1,377 RMB/ton, marking an increase of 1.75% compared to the beginning of the month.
Driver Analysis
1. Supply Side: Proactive Production Cuts Amidst Sustained Losses Serve as the Core Support for Price Rebound
By mid-May, the entire formaldehyde industry had plunged into severe losses, prompting manufacturers to voluntarily lower their operating rates. Consequently, the nationwide operating rate for formaldehyde retreated from approximately 50% in early April to a range of 25%–30% by late May. This drastic contraction on the supply side shifted the supply-demand landscape from a state of looseness to one of tight equilibrium, thereby providing the fundamental and core support for a subsequent price rebound.
2. Demand Side: Marginal Improvement at the Tail End of the Off-Season Serves as the Key Catalyst for Price Rebound
In late May, as the traditional off-season for the board industry drew to a close, some board manufacturers in southern regions began stocking up in advance of the peak renovation season expected in late June, leading to a distinct marginal improvement in demand. Concurrently, formaldehyde prices plummeted to a cyclical low; downstream manufacturers of adhesives and coatings seized the opportunity to engage in concentrated restocking at these low price points, resulting in a concentrated release of essential demand that directly drove a rapid rebound in prices.
3. Cost Side: Methanol prices have stabilized at a low level, and manufacturers' willingness to support prices has strengthened significantly
In late May, methanol prices fluctuated at low levels without exhibiting any distinct downward trend; with cost-side support remaining stable, formaldehyde manufacturers no longer needed to lower prices to offset declining raw material costs, and their resolve to maintain price levels strengthened significantly. Concurrently, the rebound in formaldehyde prices drove processing margins—which had previously suffered severe losses—to gradually recover to near the breakeven point; this further bolstered manufacturers' incentive to hold firm on pricing, thereby establishing a positive feedback loop that reinforced the price rebound.
Market Outlook:
Formaldehyde market trends are expected to remain volatile with an upward bias; while there is still room for a rebound, resistance levels overhead are clearly defined.
Fundamentals: The pattern of contracting supply is unlikely to change in the short term, and manufacturers demonstrate a strong willingness to hold up prices. With the arrival of the traditional peak season for home renovation, marginal improvements on the demand side are set to intensify further. Meanwhile, supported by declining port inventories and maintenance shutdowns at certain production facilities, methanol—a key feedstock—retains some limited upside potential in the near term, providing stable support on the cost front.
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