Upstream Production Cuts Lead to Stable but Supported Formic Acid Prices

January 12th, News

According to the commodity market analysis system, the Chinese formic acid market has recently shown a continuous sideways consolidation trend. As of January 2nd, the benchmark price for 85% formic acid was 2,300 CNY/ton, unchanged from the same period last week (January 5th), down 20.96% month-over-month, and down 22.03% year-over-year.

From the supply side, the current stable market pattern was formed starting from the resolution of the tripartite talks before January 5th. The three core formic acid production enterprises in Liaocheng, Feicheng, and Jingzhou, Hubei, reached a consensus through consultation to implement varying degrees of production cuts to protect prices. From the subsequent market performance, although the production cut measures did not immediately change the overall pattern of a loose market supply, they effectively curbed the risk of price declines and sent a clear signal of price support. During this period, the upstream companies' sales remained steady, without any significant increase in volume, but maintained a normal sales pace, with inventory levels showing a gentle downward trend.

The demand side has shown phased changes in its performance. On January 6, the market witnessed a clear wait-and-see attitude among downstream players, with buyers mostly focusing on maintaining their rigid demand, resulting in a relatively subdued trading atmosphere. However, as prices remained stable over the long term, downstream companies gradually stabilized their purchasing pace, and by January 12, the demand side had already established a steady procurement pattern. Notably, on the 12th, the market saw slight price concessions for large-order end customers; yet this localized adjustment did not shake the overall robustness of mainstream prices.

In terms of cost, the main raw material for formic acid production, methanol, showed a warming trend in the market during the same period. From January 4th to 9th, the methanol quotation at the East China port rose from 2,245 CNY/ton to 2,265 CNY/ton. The mild support from the cost side also provided favorable conditions for formic acid companies to maintain their prices. Considering the supply and demand relationship and cost factors, the current formic acid market in China has formed a balanced pattern characterized by "loose supply but supported by reduced production, stable demand with orderly procurement, and mild cost support."

The formic acid data analyst believes that, given the current stable performance on both the supply and demand sides, companies’ strong willingness to support prices, and a positive cycle of moderate inventory decline, China’s formic acid market is expected to continue its sideways trading pattern with limited room for price fluctuations. Going forward, close attention should be paid to the continued implementation of upstream production cuts and the pace at which downstream demand further unfolds.