MDC Market Dynamics: Slow Demand, Cheaper Imports, and Supply Abundance

Key Highlights

1. Price Trends: MDC prices decreased by ₹2/kg, with current tanker load offers ranging from ₹32–34/kg depending on the region and terms.
2. Supply Abundance: High production rates, cheaper imports, and competition from Sreyas Industries contribute to surplus supply.
3. Demand Dynamics: Weak demand from bulk drug producers and industrial sectors, alongside rising feedstock costs, challenges domestic manufacturers.
4. Market Outlook: Anticipated price volatility due to Sreyas Industries' impact and competition among manufacturers.

MDC Price Trends: Reduction Amid Market Challenges

• Domestic manufacturers have reduced MDC prices by ₹2/kg in the past week. Authorized dealers are now offering MDC tanker load prices at ₹32–33++ per kg, Ex-GACL.
• In the southern region, authorized dealers of TGV SRAAC are quoting slightly higher prices at ₹33–34++ per kg, Ex-Kurnool, for advance payment on bulk deals.
• Bulk purchase interest is currently within the range of ₹29–31++ per kg, Ex-plant, with 90-day payment terms. However, manufacturers are unwilling to sell at these levels due to increased feedstock costs.
• This price reduction is primarily attributed to a combination of factors, including a slowdown in ART drug demand, cheaper imports, and higher inventory levels among manufacturers. 
• Additionally, the recent resumption of operations by Sreyas Industries on the East Coast has intensified competition, effectively closing the arbitrage opportunities for Western manufacturers in the Eastern and Southern regions.

Abundant Supply and Sluggish Demand Create Challenges 

• MDC supply continues to be abundant as domestic manufacturers face fierce competition amid weakened demand. The influx of cheaper imports has further influenced and accelerated the correction in MDC prices.
• Domestic producers are particularly concerned as the cost of feedstock methanol has risen, making MDC production unprofitable for many.
• India’s domestic consumption of MDC is estimated at approximately 30,000 metric tons per month. Major downstream consumers include bulk drug producers, as well as manufacturers of paints, metalworking products, and polyurethane foam. 
• While demand for MDC was initially expected to grow at a moderate pace, it is now anticipated to recover robustly in FY 2024–25, according to insights shared by a leading MDC manufacturer.
• The current production capacities of key manufacturers are as follows:
  Grasim: 100 MT/day
  GACL: 250 MT/day
  GFL: 150 MT/day
  TGV SRAAC: 200 MT/day
  Sanmar: 50 MT/day
  Meghmani: 80 MT/day
  SRF: 350 MT/day
  Sreyas: 160 MT/day

Chemicals News: Global and Domestic Plant Updates

• In global energy markets, the WTI crude oil benchmark has risen by 0.48%, now priced at $69.54 per barrel. Meanwhile, natural gas prices have seen a slight increase of 1.47%, reaching $3.70 per MMBtu.
• CNOOC Kingboard Chemicals, a leading methanol manufacturer based in Dongfang, China, announced a plant shutdown in the first week of December 2024. This facility has a production capacity of 600 kt/annum of methanol.
• Zeon Corporation, a prominent butadiene manufacturer in Tokuyama, Japan, resumed operations at its facility in late November 2024 after a shutdown in mid-September 2024. The plant has a production capacity of 180 kt/annum.

Expert Opinion: Mixed Price Trends Ahead

• Anticipates mixed trends in MDC prices in the short term as the market adjusts to current supply conditions. 
• In the longer term, the entry of Sreyas Industries is expected to contribute to price volatility, potentially sparking price wars among domestic manufacturers. Buyers are advised to remain cautious when entering into bulk contracts amidst this bearish outlook.