Rising Pharma Production Boosts Domestic MDC Prices

Price

• Domestic methylene dichloride (MDC) prices have surged, driven by robust demand from the bulk drug sector. Spot prices have risen by Rs 1/kg, now standing at Rs 36/kg Ex Dahej and Rs 34/kg Ex Kurnool, on an advance payment basis.
• Currently, bulk contracts are offered at Rs 34/kg Ex Dahej with 90-day credit terms. For comparison, in May 2024, bulk contract prices were reported between Rs 25-27/kg Ex Dahej, based on 90-day payment terms and specific delivery locations for a three-month contract period.
• In the retail segment, barrel-packed MDC prices are notably higher. Current rates are Rs 43.50/kg Ex Dahej, Rs 44.50/kg Ex Ahmedabad, Rs 47.00/kg Ex Mumbai, Rs 47.50/kg Ex Hyderabad, and Rs 44.00/kg Ex Chennai, with 60-day credit terms. The sharp increase in retail MDC prices is primarily attributed to strong bulk demand.
• With the export arbitrage window opening for Indian producers, MDC exports are expected to tighten domestic supply in August and September 2024.

Demand and Supply

• In May and June 2024, domestic manufacturers maintained high production rates, resulting in ample inventory levels. However, demand began to strengthen in July as bulk drug manufacturers ramped up production.
• The recent surge in methanol prices is exerting upward pressure on MDC pricing, according to market sources. As the export arbitrage window remains open, MDC prices are on a gradual upward trajectory.
• India's downstream sector, which includes bulk drug manufacturing, paint stripping, metalworking, and polyurethane foam production, consumes approximately 30,000 tonnes per month of MDC.
• The initially projected Compound Annual Growth Rate (CAGR) for MDC in 2024-25 is now expected to recover strongly this fiscal year, according to a leading MDC manufacturer.
• Market participants are closely monitoring the upcoming production from Sreyas Industries Ltd, a new domestic manufacturer on the East Coast, with a planned capacity of 160 metric tonnes per day.
• Although the plant was expected to begin operations in July 2024, it is still undergoing trial runs. The commencement of this plant is anticipated to significantly impact market dynamics, as noted by a major bulk buyer on the East Coast.
• India currently has seven other MDC manufacturers, excluding Sreyas Industries Ltd: Grasim: 100 mt/day capacity GACL: 250 mt/day capacity GFL: 150 mt/day capacity TGV SRAAC: 200 mt/day capacity Sunmar: 50 mt/day capacity Meghamani: 80 mt/day capacity SRF: 350 mt/day capacity Sreyas: 160 mt/day capacity

News

• In the international market, upstream natural gas prices have risen by 4.62%, now at $2.24, while CFR China methanol prices are at $288/MT.
• Methanex has announced its regional methanol contract price for the Asia Pacific region, effective from August 1st to August 31st, 2024, set at USD 400/MT.

Expert's Opinion

• MDC prices are expected to remain firm and stable in the near term, supported by strong downstream demand and rising feedstock costs. However, the anticipated start of operations at Sreyas Industries Ltd could disrupt supply dynamics once production begins.