Price trend (1.17-2.2)

The overall formaldehyde industry in Shandong is operating at a low level under the dual pressure of cost reduction and weak demand, with continuous losses and a lack of clear direction in the market.
According to the monitoring of the commodity market analysis system of Shengyi Society, as of February 2nd, the average price of formaldehyde in Shandong Province was reported at 1023 yuan/ton, a decrease of 0.24% during the period and a year-on-year decrease of 11.07%.
Cost and profit: Poor transmission of costs leads to deep losses in the industry
The main raw material methanol price center has risen. As of February 2nd, the benchmark price of methanol in Shengyi Society was 2265 yuan/ton, an increase of 0.63% during the cycle, but it has not effectively driven the formaldehyde market. The two show a divergent trend of rising raw materials and falling products. Costs are rising, but prices are falling due to weak demand, and profits are continuously squeezed.
Supply and demand situation: synchronous reduction of supply and demand, with demand being the core drag
·On the supply side, the industry’s willingness to start production is insufficient, and the capacity utilization rate has dropped to 33.32%. As the Spring Festival approaches, enterprises will focus on reducing load and discharging inventory, and some facilities are planned to be shut down for maintenance from the end of January to early February. Despite the contraction in supply, the spot supply in the market remains abundant due to weaker demand.
·On the demand side: Weak demand is the core factor that suppresses the market.
According to the monitoring of the rise and fall of the 8 major industry indices by Shengyi Society, the building materials industry is the only sector that has experienced a month on month decline, with the index falling 1.13% at the end of January. Before the traditional Spring Festival holiday, downstream construction sites and home decoration demand entered the off-season, coupled with cold weather affecting construction progress, resulting in a significant decrease in procurement volume. The sustained downturn in the real estate industry has also dragged down the overall demand for building materials. The downstream artificial board industry of formaldehyde is mainly affected by industries such as real estate, and demand continues to shrink, only maintaining rigid procurement. Other downstream products such as formaldehyde mainly rely on digesting self-produced formaldehyde. The downstream stocking willingness is not strong before the Spring Festival, and sellers are actively shipping to control inventory.
Short term outlook
Recently, the formaldehyde market in Shandong has been struggling to operate during the traditional off-season. The industry is passively reducing its load in the face of losses, while the sustained weakness in terminal demand has led to a lack of rebound momentum in the market. In the short term, due to the impact of the Spring Festival holiday, demand will continue to remain at freezing point, and prices are likely to remain weakly volatile. Whether the market can break the deadlock depends on whether the downstream sheet metal industry’s production and stocking situation has improved beyond expectations.