MDC Market Faces Tight Supply as Monsoon Disruptions Hit Production

Price

• Methylene Dichloride (MDC) prices in the domestic market have risen sharply, driven by increased demand and supply constraints stemming from reduced production rates in the western region due to heavy rainfall.
• Spot prices have surged by Rs 1/kg, now reported at Rs 34.50/kg Ex Dahej and Rs 35.00/kg Ex Kurnool, based on 60-day payment terms.
• Current bulk contract offers are quoted in the range of Rs 33.00 to Rs 33.50/kg Ex Dahej for 90-day credit terms.
• In the retail market, barrel-packed MDC rates remain significantly higher. Prices are currently at Rs 41/kg Ex Dahej, Rs 42/kg Ex Ahmedabad, Rs 43.50/kg Ex Mumbai, Rs 45/kg Ex Hyderabad, and Rs 43.50/kg Ex Chennai, with 60-day credit terms.
• Western MDC manufacturers have faced significant production disruptions due to persistent monsoon conditions, leading to a notable decrease in output and subsequent supply shortages, particularly in the latter half of August 2024.

Demand and Supply

• In June and July 2024, domestic manufacturers reported ample inventory levels due to elevated production rates. However, from mid-July onwards, demand began to strengthen as bulk drug manufacturers ramped up their output.
• Additionally, rising methanol costs have exerted upward pressure on MDC prices, according to industry sources. The opening of the export arbitrage window has further contributed to the gradual price increase.
• India’s downstream sector, which includes bulk drug production, paint stripping, metalworking, and polyurethane foam manufacturing, consumes approximately 30 kt/month of MDC.
• The Compound Annual Growth Rate (CAGR) for MDC in 2024-25, initially projected to be modest, is now expected to show a strong recovery in the current fiscal year, as noted by a leading MDC producer.
• Attention is now focused on Sreyas Industries Ltd, a new domestic manufacturer on the East Coast with a planned production capacity of 160 mt/day.
• Although the plant was anticipated to commence operations in July 2024, it is still undergoing trial runs. Market dynamics in the MDC sector are likely to shift once this facility becomes operational, as observed by a key bulk buyer on the East Coast.
• There are currently seven MDC manufacturers in addition to 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 Meghamani: 80 mt/day production capacity SRF: 350 mt/day production capacity Sreyas: 160 mt/day production capacity

News

• In the international market, upstream natural gas prices have increased by 2.08%, reaching $1.91, while CFR China methanol prices are recorded at $293/MT.
• Methanex has posted its regional methanol contract price for the Asia Pacific region at USD 400/MT, effective from August 1st, 2024, to August 31st, 2024.

Expert's Opinion

• Market forecasts suggest that MDC prices are likely to remain firm and stable in the short term, supported by robust downstream demand and rising feedstock costs. However, the entry of Sreyas Industries Ltd into full-scale production is expected to introduce significant changes to supply dynamics once operations commence.