Strong Supply and Weak Demand Lead to Lower Dichloromethane Prices in China

August 29 update

Price Trends:

In August, the dichloromethane market in China as a whole showed a fluctuating downward trend. The operating rate of the supply side continued to climb, while the demand side performed mediocrely, leading to a continuous widening of the supply-demand gap. Inventory pressure for enterprises was significant, and some manufacturers actively lowered their quotations to accelerate the pace of shipments. Prices from some companies even fell below the 2,000 CNY/ton mark. According to the commodity market analysis system, as of August 29th, the average price of dichloromethane in bulk in Shandong region was 2,012 CNY/ton, with a decrease of 8.21% within the month and a year-on-year decline of 19.50%.

Analysis of Influencing Factors

Supply side: Operating rates surge, inventories under pressure

The overall operating rate of the chloromethane plants in the industry has climbed to around 85%, reaching a high point in the past six months, leading to a noticeably loose supply. Downstream purchasing enthusiasm is insufficient, putting pressure on companies to sell, resulting in continuous inventory accumulation. Some companies have proactively reduced prices to alleviate inventory pressure, further exacerbating the bearish market sentiment.

Cost Side: Both methanol and liquid chlorine fell sharply, leaving cost support insufficient.

On the raw material methanol front, ports continue to see inventory accumulation, while downstream demand remains weak. As a result, supply pressures remain unresolved, leading to volatile yet generally weaker prices. As of August 28, the benchmark methanol price stood at 2,245.83 CNY per ton, down 6% from the beginning of the month. Meanwhile, in the liquid chlorine market, supply has increased in Shandong province, but demand hasn’t kept pace, causing prices to decline as well. Overall, the cost support for dichloromethane from the raw-material side has significantly weakened.

Demand side: The "Golden September, Silver October" expectation is beginning to show, but the improvement is limited.

August remains the traditional off-season for demand, with downstream sectors largely maintaining rigid demand-based procurement, resulting in a subdued market trading atmosphere. On the export front, performance has been relatively strong: in July, exports of dichloromethane reached 17,562.48 tons, representing a month-on-month increase of 32.89%. This growth was primarily driven by rising demand from regions such as Southeast Asia and India, helping to ease supply pressures in China to some extent.

Looking ahead to September, demand is expected to improve marginally but will likely remain lacking strong momentum: The pharmaceutical industry is gradually entering its peak production season, with steady release of resilient demand anticipated. Meanwhile, the traditional "Golden September and Silver October" peak season may help spur a moderate recovery in sectors like adhesives and coatings. Meanwhile, demand in the electronics industry is expected to stay broadly stable. However, the ongoing downturn in the real estate sector will continue to limit growth opportunities in areas such as building insulation materials.

Future Market Outlook

Overall, the current dichloromethane market in China is still in a situation of oversupply, with weak cost support and existing inventory pressure for enterprises. It is expected that prices will continue to be under pressure in the short term. Entering September, if demand shows a significant recovery driven by the "Golden September, Silver October" period, it may provide some support to the market. However, given the high level of supply, the room for a rebound is expected to be limited, and the overall trend may be characterized by low-level fluctuations. Subsequent attention should be paid to the adjustments in production, the pace of restocking by downstream sectors, and export conditions.