As the third week of September began, the domestic dimethyl carbonate (DMC) market experienced a sharp reversal. After opening the month with tight supply and rapidly rising prices, the market sentiment changed noticeably within just a few days, with prices entering a sustained downward trend.

As of September 17, benchmark trading prices in Shandong stood at around RMB 6,150/tonne on an ex-factory basis with acceptance bills. In East China, prices fell to approximately RMB 6,250/tonne delivered with acceptance bills, while South China prices settled at around RMB 6,350/tonne delivered with wire transfer terms. Compared with the RMB 6,500–6,600/tonne peak recorded at Shandong plants on September 11, the market has experienced a significant correction in less than one week.

The DMC market has therefore shifted rapidly from a supply-tightness-driven rally to a supply-driven decline. With production recovering and downstream demand remaining cautious, market participants are increasingly focused on inventory pressure and the possibility of further price adjustments.

Supply Recovery Becomes the Main Bearish Factor

The rapid increase in effective supply is currently the most important factor weighing on the DMC market.

During the latest period, China's weekly DMC capacity utilization rate increased to 67.95%, up 1.86 percentage points week on week, bringing the industry's operating rate back to a relatively high level.

Several plant-level developments have contributed to this increase in supply. Shandong Depu New Materials' 200,000-tonne/year DMC project has successfully started production and is now operating at full capacity. At the same time, Shandong Lihuayi is gradually resuming operations, while Ningxia Baofeng's 120,000-tonne/year unit has also come online and is operating normally.

The combined impact of new capacity commissioning and the restart of previously idled facilities has significantly increased spot availability. This has weakened the supply-shortage expectations that supported the earlier price rally and has shifted the market's focus toward inventory accumulation.

As more material enters circulation, sellers are facing greater pressure to secure orders, while buyers have gained more room to negotiate. This change in supply-demand dynamics has become an important driver behind the recent price decline.

Producers Lower Prices Ahead of the National Day Holiday

Changes in producer sentiment have further accelerated the downward movement.

With the National Day holiday approaching, major producers are increasingly concerned about potential inventory accumulation during the holiday period. Higher operating rates mean that production could continue to build while downstream purchasing remains relatively limited.

Under these circumstances, some producers have started adjusting quotations downward in an attempt to stimulate buying and reduce inventory before the holiday.

However, lower prices have not generated a corresponding increase in transaction volumes. Instead, many downstream buyers remain cautious and prefer to wait for clearer market direction before making larger purchases.

This has created a negative feedback cycle in the spot market: price reductions encourage buyers to wait for even lower levels, while weak transactions encourage sellers to make further concessions. As a result, the market's bearish sentiment has become increasingly evident.

Downstream Demand Remains Relatively Weak

The demand side continues to provide limited support for DMC prices.

In the electrolyte solvent sector, there is still relatively stable underlying demand. However, orders from the end-use new energy market have not shown a strong recovery. Electrolyte manufacturers are mainly concentrating on inventory reduction and fulfilling existing long-term contracts, while their willingness to place new spot orders remains limited.

At the same time, buyers are becoming increasingly price-sensitive. As DMC prices continue to fall, downstream companies are generally reluctant to build large inventories, preferring to purchase only according to immediate production requirements.

The polycarbonate sector is also facing relatively weak end-user demand. Markets such as home appliances and building materials are currently in an off-season, resulting in cautious purchasing activity among traders and limited overall market turnover.

Meanwhile, the weekly capacity utilization rate of ethyl methyl carbonate (EMC) remains at only around 33%, providing limited additional support for demand for carbonate solvents.

Overall, both midstream and downstream participants are adopting a wait-and-see strategy. Most purchases are focused on small, essential volumes rather than large-scale restocking, making it difficult for demand to absorb the additional supply currently entering the market.

Cost Support Is Also Gradually Weakening

In addition to supply and demand factors, the cost side has also become less supportive.

Recently, prices for the key raw material propylene oxide (PO) have softened. Shandong PO ex-factory prices have retreated from their early-September highs, while propylene prices have also declined.

For DMC produced through the PO transesterification process, raw materials account for more than 60% of total production costs. Therefore, a decline in PO and propylene prices directly lowers the production cost base and weakens the cost support for DMC.

When production costs move lower at the same time that supply is increasing and demand remains subdued, producers have less incentive to maintain previous high price levels. This creates additional room for market prices to move downward.

Market Outlook: Supply-Demand Balance Remains the Key

In the short term, the DMC market is facing pressure from three directions: increasing supply, insufficient demand, and weakening cost support.

On the supply side, newly commissioned production capacity is expected to gradually ramp up, while previously idled facilities continue to resume operations. This could further increase the amount of spot material available in the market.

On the demand side, downstream buyers are unlikely to conduct aggressive restocking while prices remain on a downward trajectory. Purchasing is expected to remain focused mainly on essential requirements, which may not be sufficient to quickly absorb the additional supply.

As a result, transaction prices may continue to move lower in the near term, while market competition among suppliers is likely to remain intense.

Several factors will be particularly important in determining the next stage of the market.

First, factory inventory levels around the National Day holiday will be a key indicator. If inventory accumulation is significantly higher than expected, producers may increase price concessions in order to accelerate shipments before and after the holiday.

Second, the recovery of downstream electrolyte and polycarbonate industries will need close attention. A sustained improvement in end-user demand would be necessary to absorb the growing supply and provide a foundation for market stabilization.

Third, the pace of new capacity commissioning and the operating status of existing plants will directly influence the supply-demand balance. Faster-than-expected production growth could extend the period of price pressure, while unexpected production disruptions could temporarily ease supply pressure.

Fourth, export demand will also be worth monitoring. If overseas buyers return to the market at competitive price levels, additional export volumes could help reduce domestic supply pressure and provide some support to the market.

Overall, the DMC market has entered a period of adjustment after its sharp price increase earlier in September. Unless downstream demand improves significantly or supply growth slows, the market is likely to remain under pressure in the near term. The balance between new supply, factory inventories, downstream consumption and export orders will determine how long the current downward trend lasts and when the market can potentially find a new equilibrium.