Lead: Recently, the domestic dimethyl carbonate (DMC) market has broken out of its previous stalemate and embarked on a steady upward trend. This rally is the inevitable result of a sharp shift in market balance from oversupply to tight equilibrium, driven by both the delayed expansion of supply-side capacity and a "recovery" on the demand side. With market sentiment heating up and producers firmly confident in pushing prices higher, a firmly bullish consolidation pattern has been established in the near term.
I. Persistent Supply Tightness: Low Inventories and Supply-Demand Imbalance Underpin Prices
The core driver of this rally is the sustained tightness on the supply side. First, the release of new production capacity, which the market had widely anticipated, has fallen significantly behind expectations. Due to factors such as technical commissioning, feedstock integration, and energy-efficiency/environmental approvals, the commercial production timelines of several units have been repeatedly postponed, resulting in very limited spot supply flowing into the market as originally scheduled for this quarter. This "expectation gap" has directly dispelled concerns about supply surplus and served as the trigger for the market reversal.
Meanwhile, during this window without new capacity disruptions, major producers have largely been fulfilling prior orders and contract volumes, keeping inventory levels consistently at low-to-mid ranges. Some manufacturers have even resorted to rationing orders or suspending sales altogether, facing minimal selling pressure. With controllable inventories and no sales burden, upstream producers have significantly strengthened their pricing power, and their resolve to support prices remains highly unified.
II. Demand Shifting from "Passive" to "Proactive": A Positive Feedback Loop of Essential Procurement and Stockpiling
Compared with the established supply-side facts, the demand-side shift is more dramatic. During the earlier phase of persistent price declines or consolidation, downstream buyers and intermediaries generally adopted a wait-and-see stance, preferring to buy on rising prices rather than falling ones. As a result, their raw material inventories had been drawn down to critical minimum levels. With new capacity failing to replenish spot supply in a timely manner, the volume of freely circulating goods in the market shrank sharply, forcing downstream enterprises to transition from "waiting for low prices" to "purchasing for essential needs."
This shift in purchasing behavior progressed from tentative small-lot trial orders to concentrated bulk transactions. In particular, some small- and medium-sized downstream manufacturers, upon noticing extended lead times for product delivery, began to follow up with restocking, and some even made over-procurement to build safety inventories. This concentrated release of demand, in turn, further squeezed the already limited spot resources, creating a short-term positive feedback loop of "prices rising—procurement increasing—prices rising further."
III. Industry Chain Profit Redistribution: Upstream-Downstream Negotiations Enter a New Phase
This round of price increases has had a direct impact on profit distribution across the industry chain. For DMC producers, profit margins have seen significant improvement, alleviating the losses they previously faced due to high costs. However, for downstream industries such as polycarbonate (PC), electrolyte solvents, and coatings/adhesives, the sudden surge in feedstock costs will test their ability to pass through price increases to end products.
At present, downstream major sectors are operating at high utilization rates and can tolerate a certain degree of feedstock price increases. However, if DMC prices continue to rise unilaterally, squeezed downstream margins may prompt a reassessment of production loads and could even trigger periodic resistance. Therefore, although the market remains strong, the bargaining game between upstream and downstream players has quietly entered an intense phase.
IV. Market Outlook
Looking ahead, the DMC market in the coming period is expected to fluctuate weakly, with the price center facing downward pressure. The core pressure stems from the supply side: with units operated by Shandong Lihuayi, Shanxi Yaxin, Fujian Baisheng (Baihong), and Shandong Depu planning to restart or commence production, there is a relatively clear expectation of supply growth, with a potentially considerable month-on-month increase. Meanwhile, although the demand side has shown some improvement, downstream electrolyte solvent and polycarbonate sectors are maintaining only essential procurement, with a strong wait-and-see sentiment as they hold out for lower prices—offering little effective support to the market. On the cost front, upward momentum in feedstock propylene oxide is expected to moderate, with the market returning to a standoff, thereby weakening marginal support for DMC. Therefore, under the combined effects of rising supply, sluggish demand, and diminishing cost support, the market will likely exhibit weak volatility with a downward shift in the price center in the coming period. However, given that costs have not yet fully collapsed, the scope for deep declines may be relatively limited. Going forward, close attention should be paid to the actual progress of plant restarts/startups and whether downstream buyers engage in any phase-specific restocking.
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