September dichloromethane market continues to bottom out

September 28, News

In September, the dichloromethane market did not welcome the traditional "Golden September" peak season. Instead, under the pressure of a severe supply-demand imbalance, the market continued to hit bottom, with prices falling to a nine-year low.

Price Trend: The expected peak season fails to materialize, leading to a significant price decline

As of September 28, the average price of methylene chloride in bulk water in Shandong region fell to 1,695 CNY per ton, a sharp drop of 15.04% from the beginning of the month and a year-on-year plunge of 36.64%. The "Golden September" expectation was completely unfulfilled, with downstream purchasing sentiment being extremely weak, leading to a quiet market with low trading activity. Enterprises continued to offer discounts on their products to alleviate inventory pressure.

The Analysis of Influencing Factors

Supply Side: Maintaining High Load, Facing Intense Supply Pressure

The industry capacity utilization rate has been consistently maintained at a high level of 85%, and although some enterprises have briefly reduced their load, the impact on the overall loose supply pattern is minimal. High inventory pressure on enterprises has led to continuous price reductions to clear stock.

Cost Side: Insufficient Support

In terms of raw material methanol, the methanol market experienced narrow fluctuations in September, providing limited cost support for dichloromethane. As of September 26, the benchmark price for methanol stood at 2,253.75 CNY per ton, representing a monthly increase of 0.91%. Meanwhile, methanol producers saw their operating rates rise compared to the previous month, while some olefin plants continued to source methanol externally. Additionally, traditional downstream users stocked up ahead of the holiday period, helping companies reduce their inventory levels somewhat. On the other hand, downstream demand for liquid chlorine in Shandong province intensified, prompting neighboring regions to raise liquid chlorine prices. Despite this upward pressure, liquid chlorine prices were still unable to reverse the downward trend in dichloromethane, which remained constrained by its own supply-and-demand dynamics.

Demand Side: Both Domestic and External Demand Weakened

Insufficient domestic demand: Downstream only maintains small orders for essential needs, lacking the motivation for large-scale inventory preparation. Additionally, typhoon weather has further suppressed actual demand. The National Day holiday will lead to some factories shutting down for vacations, reducing the actual number of production days, which may cause a temporary decline in demand in early October.

Foreign demand contraction: The export volume in August decreased by 23.28% month-over-month, which is a key signal indicating that the export momentum supporting the market has weakened in September, exacerbating China's supply pressure.

Market Outlook:

It is reported that some companies have indicated plans to reduce production in October. This move could prove crucial in reversing the market downturn—if the cuts are implemented, they will effectively ease supply pressures and help stabilize prices from below. However, the recovery on the demand side remains uncertain. The National Day holiday period is expected to cut into the number of effective working days during the first half of October, potentially leading to a temporary drop in demand. Additionally, there’s still uncertainty about whether exports can resume their growth trajectory. As a result, the market is likely to enter a phase of bottoming out, followed by stabilization and gradual recovery. Market participants should closely monitor the extent of companies' efforts to cut production costs.