According to the Zhitong Finance APP, Debang Securities released a research report stating that as of August 6, the price of formic acid was 3,550 yuan/ton, an increase of 300 yuan/ton from the previous day, with a rise of +9.23%; compared to last week, it increased by +35.50%, and compared to last month, it increased by +54.35%. The current formic acid market is driven by a dual force of temporary supply contraction and strong export demand, leading to a tightening supply-demand pattern in the industry, with inventory levels dropping to a near three-year low. It is expected that product prices will continue to rise. Recommended stocks: LUXI CHEMICAL (000830.SZ), HUALU-HENGSHENG (600426.SH).

Debang Securities' main viewpoints are as follows:

Main enterprises face force majeure, temporary supply contraction

The methanol supply pattern is relatively stable, with the global market mainly dominated by Chinese enterprises. According to China Chemical Consulting and Baichuan Yingfu, the total global production capacity of formic acid in 2024 is 1.42 million tons/year, of which China's capacity is 750,000 tons/year, accounting for about 53%. Currently, there are four main formic acid production enterprises in China, including LUXI CHEMICAL (400,000 tons/year, the largest in the world), Asda (200,000 tons/year), Chongqing Chuandong (100,000 tons/year), and Yangzi BASF (50,000 tons/year). In terms of new capacity, HUALU-HENGSHENG is building a 200,000 tons/year facility, expected to be operational by the end of the year, with no other planned projects in the industry. Recently, due to insufficient operating loads caused by issues such as equipment or gas sources at major enterprises, coupled with a shutdown of one unit at the Shandong Feicheng plant, the supply of formic acid in the market has decreased. As of the week ending July 31, the domestic formic acid operating rate was 72.9%, down 8.9 percentage points from the previous week; production was 10,520 tons, down 9.0% from the previous week.

Weak domestic demand and strong external demand, supply-demand pattern tends to be tight

Methanol, also known as formic acid, is one of the basic organic chemical raw materials and is widely used in industries such as rubber, pharmaceuticals, dyes, leather, pesticides, electroplating, food, and chemicals, with the highest consumption in the pharmaceutical and food chemical sectors, exceeding 30%, followed by the pesticide sector, accounting for about 13%. In terms of domestic demand, affected by the weak recovery of the domestic economy, the terminal demand for formic acid remains sluggish. According to Baichuan Yingfu, the total consumption of formic acid in China in the first half of 2025 is expected to be about 136,000 tons, a year-on-year decrease of 5.0%. In terms of external demand, China's formic acid is mainly exported to regions such as the Netherlands, Turkey, India, Vietnam, and Russia, with strong recent export performance, and foreign trade orders from major Shandong factories have been scheduled until September. Overall, driven by temporary supply capacity contraction and a surge in exports, the domestic formic acid market is showing a tight supply-demand pattern.

Rapid inventory depletion at factories, formic acid prices may continue to rise

Driven by strong external demand, domestic formic acid inventory is rapidly depleting. According to Baichuan Yingfu, as of August 1, China's formic acid factory inventory was 2,900 tons, down 43.1% from the previous week, already at the near three-year bottom range (9% percentile), which may provide strong support for product prices, and we are optimistic about the continued rise in formic acid prices.

Risk warning: Supply increases beyond expectations, demand falling short of expectations, global trade risks, etc