Price Trend (Jan 17 - Feb 2): The formaldehyde industry in Shandong operated at a low level with fluctuations under the dual pressures of declining costs and weak demand. The industry continued to incur losses, and the market lacked a clear direction. According to monitoring by the Business Society Commodity Market Analysis System, as of February 2, the average price of formaldehyde in Shandong was reported at 1,023 yuan/ton, down 0.24% during the period and down 11.07% year-on-year.

Cost and Profit: Poor Cost Transmission, Industry Deep in Losses
The price of the main raw material, methanol, trended higher. As of February 2, the Business Society methanol benchmark price was 2,265 yuan/ton, up 0.63% during the period. However, this failed to effectively drive the formaldehyde market. The two exhibited a divergence, with raw material prices rising while product prices fell. Despite rising costs, weak demand dragged down prices, continuously squeezing profits.

Supply and Demand Situation: Simultaneous Reduction in Supply and Demand, Demand is the Core Drag
· Supply Side: The industry's willingness to operate was insufficient, with capacity utilization falling to 33.32%. As the Spring Festival approached, companies focused on reducing loads and clearing inventory, with some units planning shutdowns for maintenance from late January to early February. Although supply contracted, market spot supply remained ample due to weaker demand.
· Demand Side: Weak demand was the core factor suppressing the market. According to the Business Society's monitoring of the rise and fall of eight major industry indices, the building materials industry was the only sector to decline month-on-month, with its index down 1.13% at the end of January. Before the traditional Spring Festival holiday, demand from downstream construction sites, home decoration, and other sectors entered a slack season. Coupled with cold weather affecting construction progress, procurement volumes declined significantly. The continued downturn in the real estate industry also dragged down overall demand for building materials. The main downstream industry for formaldehyde, artificial board manufacturing, was affected by the real estate and other sectors, leading to a continuous contraction in demand, with only rigid procurement maintained. Other downstream sectors, such as methylal, also primarily relied on digesting their own formaldehyde production. Downstream companies showed little willingness to stock up before the Spring Festival, while sellers actively shipped goods to control inventory.

Short-Term Outlook
Recently, the formaldehyde market in Shandong has been struggling during the traditional off-season. The industry has passively reduced loads amid losses, while persistently weak terminal demand has left the market lacking momentum for a rebound. In the short term, due to the impact of the Spring Festival holiday, demand is expected to remain at a low point, with prices likely to maintain weak fluctuations. Whether the market can break the deadlock depends on whether there is an unexpected improvement in the operating and stockpiling conditions of the downstream board industry.