October 26th News
According to the commodity market analysis system, the recent Chinese 85% formic acid market has shown a four-stage trend of "sideways consolidation - rapid price increase - high-level consolidation." The average spot transaction price has been pushed up from 2100 CNY/ton in mid-October to 2300 CNY/ton, with a cumulative price increase of nearly 9.6%. The core driving force behind this round of price fluctuation is not a substantial improvement in demand, but rather the combined effect of supply-side production reduction expectations and corporate inventory strategies.
I. Sideways Accumulation Phase: Profit-Taking Liquidation and the Onset of Production-Cut Expectations
Before the market trend started, the market was in a recovery window following earlier discount sales. Some manufacturers actively adopted a discount strategy to speed up inventory depletion, which temporarily lowered the spot transaction levels; at the beginning of last week, prices quickly returned to the normal range, with the daily average stabilizing around 2100 CNY per ton, and the overall trend continued to be sideways consolidation.
This key change at this stage lies in individual production enterprises announcing the initiation of production cut plans, with the reduction cycle expected to last about half a month. At this point, the market's reaction to the production cuts remains cautious, and prices have not yet shown significant fluctuations, but the expectation of supply contraction has already begun to spread through the industry chain.
II. The Rapid Rally Phase: Production Cuts Take Effect
On one hand, the reduction in production by some companies has led to a temporary tightening of market supply; on the other hand, manufacturers' inventories are at moderate levels, with no significant pressure to sell, giving companies the confidence to raise prices accordingly.
III. High-Level Consolidation Phase: Weak Supply-Demand Balance and Diminishing Upside Momentum
Despite some production companies still implementing phased reductions, the overall supply surplus in the market remains higher than the actual demand from end-users, and the industry's supply and demand are in a weak balance. After prices have continuously risen, the support for further upward breakthroughs is clearly insufficient, limiting the short-term momentum for price increases.
Overall, the current increase in formic acid prices is a typical supply-driven market trend, with production reduction pace and inventory levels being the two key variables determining the short-term trend. Subsequent prices may potentially decline due to changes in maintenance schedules, but this will still require close attention to the actual supply and demand dynamics in the Chinese market.
