China Polyoxymethylene Prices Surge After Holiday Despite Decline in Demand

As China navigates the aftermath of its recent holiday period, the Polyoxymethylene (POM) market is witnessing a notable increase in prices. The notable increase in the price of feedstock Formaldehyde impacted the downstream derivative markets including POM. The market in China is currently experiencing a phase of sufficient supply but is grappling with subdued demand, particularly from key downstream sectors such as automotive and construction. As a ripple effect, the cost of POM and feedstock Formaldehyde appreciated by 1% FOB Shanghai, and 2.2% FOB Shandong basis after the Labour Day holiday in the Chinese market.

The POM market in China is characterized by adequate supply levels. Post-holiday periods often see fluctuations in market activity, but recent reports indicate that POM downstream enterprises have maintained operational stability, with activity levels hovering around 60%. This stability has contributed to a balanced stock situation, suggesting that manufacturers and suppliers have managed inventory levels effectively to meet ongoing production needs.

Domestic POM downstream enterprises are currently adopting a conservative approach, with many operating just enough to sustain production. This cautious stance is reflective of the broader economic environment and the specific challenges faced by these sectors. Consequently, while the supply side remains strong, the tepid demand is a cause for concern among market participants.

Downstream demand for POM in China has been less robust, primarily due to the underperformance of major consuming sectors. The automotive industry, a significant consumer of POM, has faced notable headwinds. Weak market performance has led to a decline in demand for automotive components, which traditionally drive substantial POM consumption. Similarly, the construction sector, another critical end-user of POM, has also seen reduced activity. Factors such as economic uncertainties and sluggish construction projects have contributed to this downturn.

The early stages of the year saw significant import activities, leading to an ample availability of POM in the Chinese market. This influx of imported materials has bolstered the confidence of local manufacturers, who are now attempting to leverage this surplus to adjust pricing strategies. Despite the favorable supply scenario, the real challenge lies in the demand side of the equation.

The demand from downstream industries has decreased, leading to an anticipated reduction in the future supply of goods. This has alleviated some of the pressure on the supply side. However, downstream consumption has remained weak, which is curbing effective market support. As a result, the future market is expected to remain volatile.