According to data monitored by SunSirs, the formaldehyde market in the second half of July saw an overall trend of a slight initial rise, followed by a periodic pullback to a low point, and finally a strong rebound. As of July 27, the average price of formaldehyde in the Shandong region was quoted at 1,278 RMB/ton, up 2.81% from the middle of the month.

Analysis of Driving Factors

Cost side: Methanol feedstock had shifted from weakness to strength, providing upward support.

Data from SunSirs indicates that formaldehyde prices do not track real-time fluctuations in methanol prices; instead, there is a transmission lag of three to five trading days. Consequently, the impact of unidirectional movements in raw material costs—whether bullish or bearish—tends to be reflected in formaldehyde prices only after a delay. Currently, methanol prices have retreated from their highs; while formaldehyde prices are gradually absorbing the cost implications of the earlier raw material surge, the bearish pressure from the recent short-term decline in raw material costs has not yet been transmitted to the formaldehyde market.

Supply Side: Periodic tightening of supply; inventory pressure remained manageable.

During the price correction phase in mid-to-late July, some producers curtailed operating rates due to poor margins, leading to a contraction in market supply. Ongoing maintenance and reduced operating rates at major regional facilities kept finished-product inventories at low-to-moderate levels overall, preventing any significant inventory buildup. As prices fell to lows, downstream "must-have" restocking increased, further accelerating inventory depletion and driving a price rebound from the bottom.

Demand side: Gains were constrained by the traditional off-season, with support coming only from essential needs.

The primary downstream sectors for formaldehyde are wood-based panels and adhesives; July and August mark the traditional off-season for demand. High temperatures and rainfall have hampered operating rates at panel manufacturing plants, and with insufficient end-market orders, downstream buyers lack the appetite for large-scale stockpiling, generally maintaining a "purchase-as-needed" approach.

The recent price rally is driven primarily by cost factors and restocking at low price points rather than a surge in end-market demand; persistent constraints on the demand side will limit the scope for sustained, significant price increases.

Market Outlook:

In the short term, the formaldehyde market is expected to maintain a pattern of volatility with a bullish bias, though the upward momentum will likely moderate. While prices retain some room for a continued rally driven by market inertia, there is insufficient momentum for a sustained, sharp, one-way surge. As we move into August, however, the market faces the risk of a pullback following any peak, driven by the gradual transmission of bearish cost factors and intensifying demand constraints typical of the off-season.

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