Indian MDC Market Sees Price Correction Amid Ample Supply and Weak Demand

Key Takeaways

• Price Reduction: Domestic MDC prices decreased by ₹3/kg this week, with prices ranging from ₹28-28.50/kg depending on region and payment terms.
• Rising Feedstock Costs: Manufacturers face higher methanol costs, making MDC production unprofitable at lower price points.
• Supply & Demand: MDC supply remains ample, but weak demand from the pharmaceutical sector and higher inventory levels are affecting the market.
• Global Energy Impact: WTI crude oil prices have risen slightly, while natural gas prices have softened, influencing production costs.
• Market Outlook: Increased production from TGV SRAAC and Sreyas may lead to price volatility, and buyers are advised to exercise caution in securing bulk contracts.

MDC Prices: Domestic Prices Down

• Domestic manufacturers have reduced methylene dichloride (MDC) prices by ₹3/kg this week. Authorized dealers are now offering MDC tanker load prices at ₹28.00–28.50++ per kg, Ex-Gujarat, on 60-day payment terms.
• In the southern region, authorized dealers of TGV SRAAC are quoting lower prices at ₹26.50–27.50++ per kg, Ex-Kurnool, for advance payment on bulk deals.
• Bulk purchase inquiries are currently in the range of ₹23–24++ per kg, Ex-plant, with 90-day payment terms for February and March contracts. However, manufacturers are unwilling to sell at these levels due to increased feedstock costs.
• The ongoing price correction is driven by multiple factors, including sluggish demand from the active pharmaceutical ingredient (API) sector and higher inventory levels among manufacturers. Additionally, increased production capacity from TGV SRAAC and new entrant, Sreyas, has contributed to the price decline.

MDC Supply & Demand: Ample Supply, Weak Demand

• MDC supply remains ample as domestic manufacturers face stiff competition amid weak demand.
• Producers are particularly concerned about the rising cost of methanol, a key feedstock, which has made MDC production unviable for many.
• India’s monthly domestic MDC consumption is estimated at approximately 30,000 metric tons, with major end users including bulk drug manufacturers, paint producers, metalworking industries, and polyurethane foam manufacturers. 
• While demand was initially expected to grow at a steady pace, a sharp decline in ARV drugs production is likely to impact MDC consumption in the short term.
• The current production capacities of key domestic manufacturers are as follows:
  1. Grasim: 100 MT/day
  2. GACL: 250 MT/day
  3. GFL: 150 MT/day
  4. TGV SRAAC: 250 MT/day
  5. Sanmar: 50 MT/day
  6. Meghmani: 80 MT/day
  7. SRF: 350 MT/day
  8. Sreyas: 160 MT/day

MDC Market News: Crude Oil Price Impact

• In the global energy market, WTI crude oil prices have edged up by 0.23% to $73.94 per barrel. Meanwhile, natural gas prices have softened by 0.75%, now trading at $3.09 per MMBtu.
• CNOOC Kingboard Chemicals, a major methanol producer based in Dongfang, China, announced a plant shutdown in the first week of December 2024. The facility has a production capacity of 600 kt per annum of methanol.

Expert Opinion: Expected Near-Term Price Volatility

• MDC prices are expected to witness mixed trends in the near term as the market adjusts to current supply conditions. Over the long term, increased capacity from TGV SRAAC and the newly operational Sreyas plant may lead to further price volatility, potentially triggering price wars among domestic manufacturers. 
• Buyers are advised to exercise caution when securing bulk contracts amid the ongoing bearish sentiment.