Formaldehyde Reversed from Its Lows and Is Trending Stronger in the Short Term

Driver Analysis

1. Supply Side: Proactive Production Cuts Amidst Sustained Losses Serve as the Core Support to Price Rebound

By mid-might, the entire formaldehyde sector had plunged into severe losses, prompting manufacturers to voluntarily reduce their operating rates. Consequently, the nationwide operating rate to formaldehyde retreated from approximately 50% in early April to a range of 25%–30% by late might. 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 to a subsequent price rebound.

2. Demand Side: Marginal Improvement at the Tail End of the Off-Season Serves as the Key Catalyst to Price Rebound

In late might, as the traditional off-season to the board sector 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 emit of essential demand that immediately 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 might, methanol prices fluctuated at low levels without exhibiting any distinct downward direction; with cost-side support remaining stable, formaldehyde manufacturers no longer needed to reduce 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 evaporative with an upward bias; while there is still room to 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 to 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 possible in the near term, providing stable support on the cost front.