Price trend: The market is showing a unilateral downward trend (1.17-1.28)
In the second half of January, the domestic dimethyl carbonate (DMC) market continued to decline and accelerated its bottoming out due to abundant supply. According to the monitoring of the Commodity Market Analysis System of Shengyi Society, as of January 28th, the average price of industrial grade dimethyl carbonate in China was 3750 yuan/ton, a decrease of 5.7% during the period.
Core contradiction: The intensification of the loose supply and demand pattern is the main cause of the decline. The release of new production capacity, coupled with weak demand for downstream electrolytes and inventory in traditional fields, has led to a continuous increase in market inventory pressure.
Core driving factors
1. Supply side (strong bearish): Capacity increase and high operating rate coexist
Continuous release of new production capacity: On January 13th, the 200000 tons/year dimethyl carbonate plant in Hubei began to release products to the market. This is the most crucial supply increment of the current period, completely changing market supply and demand expectations.
High load operation of existing facilities: Against the backdrop of high industry production capacity, major facilities continue to operate at high loads without large-scale maintenance plans, exacerbating the pressure on spot supply.
Proactive destocking by enterprises: Faced with the Spring Festival holiday and bearish expectations, manufacturers and holders have a strong willingness to accelerate destocking and offer discounts before the holiday, and the proactive price reduction behavior has amplified the price drop.
2. Demand side (weak support): The main downstream procurement has slowed down comprehensively
Electrolyte demand falls short of expectations: Electrolyte companies have collapsed due to lower than expected growth in terminal battery demand and a shift in stocking focus towards raw materials such as lithium carbonate, resulting in rigid small order purchases of dimethyl carbonate.
Traditional downstream replenishment and closure: Traditional downstream industries such as polycarbonate and coatings have basically completed replenishment before the Spring Festival. Although the supply and demand in the PC industry have improved in the medium and long term, the short-term production has been stable with a slight decrease due to the impact of holidays and macro environment, resulting in poor stocking enthusiasm for the raw material dimethyl carbonate.
The mentality of buying up and not buying down: After the downward trend of prices becomes clear, downstream investors generally hold onto the currency and wait for lower prices, resulting in a lighter actual trading volume in the market.
3. Cost side (limited support): raw material fluctuations and profit contraction
Epoxy propane: With a price drop of 5.02%, it is one of the main raw materials for DMC. Its weakening directly weakens the cost support of DMC, coupled with the narrowing profit of EO/PO ester exchange method, and the increased willingness of enterprises to reduce prices and reduce inventory.
Methanol: The price has increased by 3.08%, but the proportion of methanol in DMC raw materials is relatively low, and the decline in epoxy propane is greater, so the overall cost side still shows a weak pattern.
Dimethyl ether: The price remains stable and has no significant impact on the cost of DMC.
4、 Short term outlook
Overall, it is expected that the dimethyl carbonate market will maintain a pattern of “weak stability, stalemate, and low volatility” before the Spring Festival.
Before the holiday (until early February): With downstream factories and logistics gradually shutting down, the market will enter a state of “price but no market”, and transactions will be extremely light. Under the dual pressure of sufficient supply and demand vacuum, prices are unlikely to rebound and are expected to consolidate at a low level at the current position.
Key turning point after the holiday (late February): The turning point of the market depends on the pace of downstream resumption of work after the holiday. If downstream demand can recover as scheduled in late February, and at the same time, whether the supply side can undergo spring centralized maintenance to hedge against new production capacity, it will be the key to whether prices can stop falling and stabilize. It is necessary to closely monitor the start-up plan of the main production facilities.
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