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In China, formaldehyde prices have recently dipped, primarily owing to the volatile cost of methanol, its key raw material, which has been receding of late amid constant fluctuation. Moreover, the downstream demand from panel factories (wood panels such as particleboards, plywood, and medium-density plywood) weakened due to a combination of rising temperatures and poor terminal demand, prompting these factories to lower their operating rates. This reduction in demand from panel manufacturers weighed on formaldehyde prices.

Throughout May, the formaldehyde market experienced an overall negative trend. Particularly, the downstream demand from panel manufacturing sectors, which significantly consume formaldehyde, was inconsistent. The overall price sentiment for formaldehyde was dampened by the decline in operating rates at mainstream downstream plate factories. This anticipation of reduced activity led to weakened support for formaldehyde production, with inventories seeing a slight buildup ascribed to declining sales. As a result, the market faced slight downward pressures, culminating in an overall negative performance for the month.

The dip in the prices for formaldehyde also ushered due to a combination of stable global coal supply, increased domestic imports, and insufficient domestic demand to sustain high coal prices. This further pulled the prices for methanol (and methanal/formaldehyde) down. Moreover, the rise in temperatures recently led to reduced civilian electricity demand, thus decreasing the pressure on power plant inventories. As a result, terminal operations primarily relied on long-term cooperative agreements, switching to demand-based warehouse replenishment. This bearish cost side scenario for methanol was marked by an abundant supply amidst only average downstream demand, maintaining a balanced supply-demand equation.

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Although towards the end of the month, the methanol prices saw a marginal uptick due to a tightening supply of high-quality chemical coal at ports and increasing electricity demand due to warmer temperatures, the overall market sentiments for methanol remained languid and formaldehyde prices in China remained on the lower end.