Expectations of Tightening Supply Dominate the Recovery in Formic Acid Prices

January 26th, News

According to the commodity market analysis system: Recently, the price of formic acid has slightly rebounded. As of January 26th, the benchmark price for 85% industrial-grade formic acid in China is 2,350 CNY per ton, an increase of 2.17% compared to the same period last week (January 19th), a 2.17% increase week-over-week, and a 20.34% decrease year-over-year.

Supply Side: Continued Production Cuts to Stabilize Prices + Increased Expectations of Maintenance, Supporting Price Increases

The supply-side contraction signal is the core driving force behind this market recovery. From an overall industry perspective, in late January, mainstream companies generally maintained a reduced load operation status, continuing the spirit of the production cut and price stabilization agreement reached at the beginning of the month by three core companies in Liaocheng, Feicheng, and Jingzhou, Hubei. Although the current industry inventory remains in the mid-to-high range, the controllable inventory level, combined with the sustained reduced load operations, has effectively alleviated the pressure from the previous oversupply, laying the foundation for stabilizing prices.

More crucially, the maintenance plan for a 200,000-ton-per-year main facility in Liaocheng, Shandong, has become an important catalyst for the market's upward trend. Since the information was disclosed on the 21st, it has continuously influenced market expectations, leading traders and downstream companies to form a consensus on the tightening of subsequent supply.

Demand Side: Primarily driven by rigid demand procurement, making it difficult to generate strong upward momentum.

Demand overall was lackluster and failed to provide substantial support to the market. In late January, downstream industries generally maintained a just-in-time purchasing rhythm. Traditional demand sectors such as feed, leather, and dyeing were still in the seasonal off-peak period, with operating rates below 60%, and there was low enthusiasm for large-scale stockpiling. Among them, the pesticide industry has not yet fully started spring plowing preparations, while the leather and dyeing industries, affected by weak terminal consumption, have limited absorption capacity. Only the pharmaceutical and chemical sector maintained a small amount of rigid demand procurement, which is insufficient to change the overall balance of market supply and demand.

Formic acid data analysts believe: Considering the current market supply and demand situation, inventory levels, and industry expectations, the Chinese formic acid market is expected to maintain a sideways consolidation trend in the short term. The implementation of the major plant maintenance plan in Liaocheng, Shandong, will be the core variable determining the subsequent market trend. If the maintenance proceeds smoothly, market supply will tighten substantially, and against the backdrop of the industry's broader efforts to reduce production to support prices, there is potential for formic acid prices to rise further. Conversely, if the maintenance plan is delayed or canceled, expectations of a more relaxed supply situation may resurface, significantly weakening the momentum for price increases.