Strong Supply and Weak Demand Lead to Continuous Bottoming of Dichloromethane Market in China

September 9th News

Price Trends:

In early September, the dichloromethane market in Shandong still continued its bottom-seeking trend, failing to see the expected "Golden September" peak season. The core reason lies in the loose market supply and weak demand. The operating rate on the supply side remained high, while the expected "Golden September Silver October" on the demand side did not materialize, leading to poor trading within the market. Enterprises focused on shipping, offering discounts to promote sales and reduce inventory, engaging in competitive pricing, with prices continuously reaching new lows. According to the commodity market analysis system, as of September 9th, the average price of dichloromethane in bulk in Shandong was 1,940 CNY/ton, a decrease of 2.76% from the beginning of the month and a sharp drop of 28.94% year-on-year.

Analysis of Influencing Factors

Supply Side: High Production Levels, Inventory Under Pressure

Affected by weak demand, the overall operating rate of industry methane chloride plants edged down slightly to around 85%, still remaining at a relatively high level with ample supply in the market. Downstream buyers show limited purchasing enthusiasm, putting pressure on companies to ship their products. To ease inventory pressures, some firms are resorting to price reductions, though the market is likely to remain largely in a wait-and-see consolidation phase.

Changes on the supply side are key: If more companies reduce production capacity or halt operations in the future due to cost pressures, malfunctions, or unplanned maintenance, it could effectively ease supply-side constraints in the market, thereby providing support for prices.

Cost Side: Methanol prices rise, strengthening cost support

On the methanol front, demand for olefins in mainland China remains robust. Amid expectations for a strong "Golden September," downstream buyers are adopting a proactive stance of buying at higher prices, leading to short-term market conditions characterized by relatively strong, volatile trading. As of September 9, the benchmark methanol price stood at 2,271.67 CNY per ton, up 1.72% from the beginning of the month. If methanol prices continue to strengthen, it could squeeze profit margins for dichloromethane production, potentially prompting manufacturers to adopt a more aggressive pricing strategy. Meanwhile, in terms of liquid chlorine, demand in Shandong province has failed to keep pace, forcing companies to offer discounts and lower prices mid-week. Currently, prices in the region remain unchanged compared to the start of the month.

Demand Side: Buy on Demand, Awaiting a Boost from the Traditional "Golden September-October" Peak Season

The downstream industries as a whole performed poorly, with high temperatures and major events in China impacting the operating rates of some downstream companies. Many downstream firms have maintained a rigid demand-based procurement strategy—purchasing only as needed—showing little inclination to build up large inventories.

Refrigerant R32 is widely used in air conditioning and other fields, with consistently strong downstream demand. However, production quotas have led to tight market supply, and companies are holding back from selling due to high prices. It is expected that the average price will rise to 62,000-64,000 CNY/ton from September to November. Due to the limited production quotas, the demand for raw materials is also limited, and the continuous increase in its market price has not driven up the price of the raw material, dichloromethane.

Traditionally, September and October are peak seasons for industrial production in China. It is necessary to closely monitor the recovery of actual demand downstream. If downstream demand can recover better than expected, it may drive a wave of inventory replenishment demand.

Future Market Outlook

The dichloromethane market kicked off sluggishly in September, with weak demand being the central issue. Whether prices can rebound hinges on whether the supply side sees a noticeable contraction—such as large-scale plant maintenance—and on whether the traditional "Golden September and Silver October" peak season can genuinely boost downstream demand.

In the short term, the possibility of a significant market rebound is small, and it is expected to continue with a volatile bottom-seeking or low-level operation.