With Cost Support Waning, Formaldehyde Prices Drift Lower, Testing Bottom

Price Trends

According to SunSirs’ data, during the first half of May, the formaldehyde market continued the weak corrective trend observed in the latter half of April. The market exhibited a pattern characterized by “weak cost-side support, sluggish demand, and volatile downward pricing.” In the short term, the prevailing loose supply-demand balance is unlikely to change, and the price center of gravity is expected to continue drifting lower; however, prices may bottom out slightly and subsequently stabilize and rebound during the middle to latter part of the month. As of May 13, the average price of formaldehyde in the Shandong region stood at 1,357 RMB/ton—a decline of 2.07% compared to the beginning of the month—positioning it within the medium-to-high range for the year to date.

Driver Analysis

1. Cost Side: Weakening methanol prices and squeezed profit margins are forcing price concessions.

During the first half of May, the price of feedstock methanol followed a “rise-then-fall” trajectory, recording an overall decline of approximately 4.6%. This drop was significantly steeper than that of formaldehyde, resulting in a continued weakening of cost-side support.

The downward trend in methanol prices has severely squeezed profit margins for formaldehyde manufacturers. Consequently, the industry has shown an increased willingness to actively concede margins to facilitate sales, thereby further amplifying the downward pressure on prices.

In the short term, methanol lacks the momentum for a substantial rebound; the pattern of weak cost-side support remains largely unchanged, making it difficult to provide effective price floor support for formaldehyde.

2. Demand Side: Weak End-Market Activity; Dominated by Essential Demand, Limited Room for Growth

Operating rates in the downstream man-made board industry remain below 50%, as the persistent slump in the real estate sector continues to drag down end-market orders. Procurement within supporting industries—such as adhesives and coatings—is currently driven primarily by immediate, essential needs; market participants show little inclination to restock, resulting in a lack of the demand surge typically generated by concentrated inventory building.

With the effects of the traditional off-season compounded by the approaching summer heat, downstream enterprises maintain a cautious outlook regarding future market conditions. Consequently, most have adopted a “buy-as-needed” procurement strategy, leading to sluggish market trading activity and insufficient momentum to drive price increases.

3. Supply Side: Low Operating Rates + Inventory Accumulation—Loose Supply Landscape Unlikely to Change

Industry operating rates remain at low levels. The contractionary effect on supply resulting from maintenance shutdowns at certain facilities has been offset by the accumulation of inventories at the corporate level; consequently, the overall market supply remains relatively loose.

Market outlook

In the short term, the market is exhibiting weak bottom-seeking behavior, with downward momentum gradually dissipating. The current bearish trend—characterized by “expanding negative divergence”—is expected to persist; however, as prices approach their medium-to-long-term cost lines, selling pressure will progressively subside, resulting in an overall market pattern characterized by “weak bottom-seeking and low-level consolidation.”

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