[Introduction] In July, demand in the MSG market failed to recover as expected, and industry inventories rose; coupled with fierce market competition, MSG prices entered a phase of continuous decline. As prices gradually retreated from their highs, market attention shifted to identifying the price floor. In August, downstream sectors will enter the back-to-school season and the stocking period for two major holidays, leading to a significant rebound in demand compared to the previous period. Furthermore, with most enterprises operating at a loss, there is likely to be a growing reluctance to sell at low prices, raising expectations for a price rebound.
In July, the market price of MSG continued its downward trend, with the pace of the decline accelerating. Amidst fierce price competition and a supply-demand imbalance that showed no signs of improvement, MSG prices continued to defy seasonal patterns as they sought a market bottom. As of July 24, the average price for 40/50/60-mesh MSG from major producers stood at 6,660 yuan per tonne-a month-on-month decrease of 6.5% and a year-on-year increase of 2.1%. With prices steadily falling throughout the month, downstream purchasing enthusiasm waned; buyers largely adopted a "purchase-as-needed" approach, failing to provide effective support for the market.
Persistent Weak Demand Weighs on MSG Prices
Entering July, major MSG producers have maintained high operating rates; although some enterprises in Shandong and Inner Mongolia have scaled back production, the overall contraction in supply remains insufficient to provide significant upward support for prices. As of July 22, the industry's operating rate stood at 84%, down 3 percentage points from the same period last month. Meanwhile, a "wait-and-see" sentiment prevails in sales markets. Bearish views have emerged as upstream order prices gradually decline; traders generally believe there is still room for further price drops and are prioritizing risk aversion, showing little inclination to restock heavily. While some end-user enterprises are making inquiries and restocking, demand has fallen short of peak-season expectations. Divergent market sentiments have prevented a concentrated surge in demand, continuing to exert downward pressure on market trends.
MSG Price Drops Outpace Cost Reductions, Exacerbating Losses
Since the start of the third quarter, the prices of corn and soda ash-two key raw materials for MSG-have trended downward, while the prices of sulfuric acid and coal have continued to rise year-on-year. As of July 23, the national average price of corn stood at 2,270.16 yuan/tonne, down 1.25% month-on-month and 3.06% year-on-year. The average monthly price of soda ash was 1,177.2 yuan/tonne, a decline of 3.5% month-on-month and 7.8% year-on-year. However, the concurrent rise in sulfuric acid and coal prices has steadily pushed up the cost baseline for MSG production; as of July 23, the average monthly price of sulfuric acid was 2,088.8 yuan/tonne, up 5.7% month-on-month and 202.5% year-on-year. The average monthly price of thermal coal (5,500 kcal) was 615 yuan/tonne, down 0.4% month-on-month but up 41.5% year-on-year. Overall, as of July 23, the cost per tonne of MSG had declined by only 0.9%. Since the drop in MSG prices significantly outpaced the reduction in costs, enterprises show a diminished willingness to implement further substantial price cuts in August.
MSG Market Bottoms Out in August; Prices May Rebound
In August, most MSG producers maintained stable operating rates, keeping market supply relatively ample. On the demand side, the onset of the back-to-school season and the commencement of stocking for the Mid-Autumn Festival and National Day holidays suggest a potential minor surge in procurement; distributors may replenish inventories at low price points-anticipating future price increases-thereby easing the earlier supply-demand imbalance. Conversely, with costs fluctuating at high levels, MSG producers are increasingly resistant to further price drops, intensifying the tug-of-war between upstream and downstream markets. Overall, if trading volume picks up at current low price levels, there is limited room for further declines; a market bottom is likely to emerge in mid-August, potentially followed by a gradual, modest price rebound, though close attention should be paid to order intake at production facilities.
Source: Zhuo Chuang Information