1、 Rapid expansion of production capacity and oversupply in the market

Since 2021, the total production capacity of DMF (dimethylformamide) in China has entered a stage of rapid expansion. According to statistics, the total production capacity of DMF enterprises has rapidly increased from 910000 tons/year to 1.77 million tons/year this year, with a cumulative increase of 860000 tons/year, a growth rate of 94.5%. The rapid increase in production capacity has led to a significant increase in market supply, while demand follow-up is limited, thereby exacerbating the contradiction of oversupply in the market. This supply-demand imbalance has led to a continuous decline in DMF market prices, falling to the lowest level since 2017.

2、 Low industry operating rate and inability of factories to raise prices

Despite the oversupply in the market, the operating rate of DMF factories is not high, only maintained at around 40%. This is mainly due to the sluggish market prices, which have severely compressed factory profits, leading many factories to choose to shut down for maintenance to reduce losses. However, even with low opening rates, the market supply is still sufficient, and factories have attempted to raise prices multiple times but have failed. This further proves the severity of the current market supply and demand relationship.

3、 Significant decline in corporate profits

The profit situation of DMF enterprises has continued to deteriorate in recent years. This year, the company has been in a long-term loss making state, with only slight profits in a small part of February and March. As of now, the average gross profit of domestic enterprises is -263 yuan/ton, a decrease of 587 yuan/ton from last year’s average profit of 324 yuan/ton, with a magnitude of 181%. The highest point of gross profit this year occurred in mid March, at around 230 yuan/ton, but it is still far below last year’s highest profit of 1722 yuan/ton. The lowest profit appeared in mid May, at around -685 yuan/ton, which is also lower than last year’s lowest profit of -497 yuan/ton. Overall, the fluctuation range of corporate profits has significantly narrowed, indicating the severity of the market environment.

4、 Market price fluctuations and the impact of raw material costs

From January to April, the domestic DMF market prices fluctuated slightly above and below the cost line. During this period, the gross profit of enterprises mainly fluctuated narrowly around 0 yuan/ton. Due to frequent factory equipment maintenance in the first quarter, low industry operating rates, and favorable supply support, prices did not experience a significant decline. Meanwhile, the prices of raw materials methanol and synthetic ammonia have also fluctuated within a certain range, which has had a certain impact on the price of DMF. However, since May, the DMF market has continued to decline, and downstream industries have entered the off-season, with ex factory prices falling below the 4000 yuan/ton mark, setting a historic low.

5、 Market rebound and further decline

At the end of September, due to the shutdown and maintenance of the Jiangxi Xinlianxin device, as well as a lot of positive macro news, the DMF market began to rise continuously. After the National Day holiday, the market price rose to around 500 yuan/ton, DMF prices rose to near the cost line, and some factories turned losses into profits. However, this upward trend did not continue. After mid October, with the restart of multiple DMF factories and a significant increase in market supply, coupled with downstream high price resistance and insufficient demand follow-up, DMF market prices have fallen again. Throughout November, DMF prices continued to decline, returning to the low point before October.

6、 Future market outlook

At present, the 120000 ton/year plant of Guizhou Tianfu Chemical is being restarted, and it is expected to release products early next week. This will further increase market supply. In the short term, the DMF market lacks effective positive support and there are still downside risks in the market. It seems difficult for the factory to turn losses into profits, but considering the high cost pressure on the factory, it is expected that the profit margin will be limited.