Domestic MDC Prices Dip Amid Weak Pharma Demand; Recovery Anticipated

Chemical Price

• Domestic methylene dichloride (MDC) prices saw a slight decrease today, driven by weaker demand from the pharmaceutical sector, while supply remains stable with moderate production rates from domestic manufacturers.
• Spot prices have dropped by ₹0.5/kg, with current levels standing at ₹33.00/kg Ex-Dahej and ₹34.50/kg Ex-Kurnool, on 60-day payment terms.
• Bulk contract offers now range between ₹32.00 and ₹33.50/kg Ex-Dahej for 90-day credit terms, depending on delivery locations.
• In the retail market, barrel-packed MDC prices continue to be significantly higher. Current prices are ₹41/kg Ex-Dahej, ₹43/kg Ex-Ahmedabad, ₹44.50/kg Ex-Mumbai, ₹45/kg Ex-Hyderabad, and ₹44.50/kg Ex-Chennai, all with 60-day credit terms.
• This week saw a correction in domestic methanol prices, contrasting with a sharp surge in Asian benchmark CFR China methanol contracts.
• Week-on-week, MDC prices fell by nearly ₹3/kg due to subdued demand. However, some market participants anticipate a quick recovery in the near future.

Chemical Demand and Supply

• In August 2024, domestic manufacturers reported lower inventory levels as production rates were impacted by the monsoon season. The recent correction in domestic methanol prices has generated mixed market sentiments, according to a trader.

• India’s downstream consumption of MDC, which spans sectors such as bulk drug manufacturing, paint stripping, metalworking, and polyurethane foam production, is estimated at around 30 kt/month.

• The Compound Annual Growth Rate (CAGR) for MDC in FY 2024-25, initially projected to be moderate, is now expected to see a robust recovery, according to a leading MDC producer.

• A key development to watch is the upcoming production from Sreyas Industries Ltd, a new domestic player located on the East Coast with a planned production capacity of 160 mt/day.

• While operations were initially scheduled to begin in July 2024, the plant is still undergoing trial runs. Once fully operational, the facility is expected to significantly shift the dynamics of the MDC market, as per a major buyer based on the East Coast.
  

• Currently, there are seven other MDC manufacturers in India alongside Sreyas Industries Ltd:

• Grasim: 100 mt/day production capacity

• GACL: 250 mt/day production capacity

• GFL: 150 mt/day production capacity

• TGV SRAAC: 200 mt/day production capacity

• Sunmar: 50 mt/day production capacity

• Meghmani: 80 mt/day production capacity

• SRF: 350 mt/day production capacity

• Sreyas: 160 mt/day production capacity

Chemical News

• On the international front, upstream natural gas prices have risen by 1.37%, currently at $2.85/MMBtu, while CFR China methanol prices are reported at $289/MT.
• Yisheng Dahua has reduced operating rates at its PTA Unit. The Unit is located in Dalian, Liaoning, China with a production capacity of 3.75 Million Tons/Year.
• Xinjiang Tianye is planning to shut its No.3 MEG Plant for maintenance work. The Plant is located in Shihezi, Xinjiang, China with a production capacity of 600,000 Tons/Year.
• Shandong Haijiang Chemical is operating its Acrylonitrile (ACN) Plant at full rates in September, 2024. The Plant is located in Zibo, Shandong Province, China with a production capacity of 130,000 Tons/Year.

Expert Opinion

• The market outlook suggests that MDC prices are likely to remain stable in the short term, with a strong recovery anticipated in October and November due to higher feedstock replacement costs. However, the full-scale commencement of production at Sreyas Industries Ltd is expected to significantly impact the supply landscape once the plant becomes fully operational.