Supply-Demand Struggle: Methylene Chloride Rebounds from October Lows

October 30th, according to news from China,

Price Trend:

In October, the dichloromethane market in China showed a "rebound from a low" trend, with the core driving factor being the tightening of supply. The market prices experienced two boosts in the middle and at the end of the month, but the demand side did not provide strong support.

· Early month: Weak demand after the holiday season puts pressure on inventory, leading to a 1.73% drop in prices.

Mid-month: News of maintenance releases, expectations of tighter supply pushed prices up by 2.64%.

· Late month: Supply recovered and became loose, but demand was insufficient, causing prices to plummet by 3.29%, reaching a historical low in 13 years.

· End of the month: Companies ease burdens and stabilize prices, leading to a strong market rebound of 4.25%

As of October 30, the average price of bulk water in Shandong region was reported at 1765 CNY per ton, a slight increase of 1.29% from the beginning of the month, but a sharp decline of 33.4% year-on-year, indicating that the market is still in a deep adjustment period.

Supply Side: Changes in supply are the key to driving market trends in China.

At the beginning and end of the month, the methylene chloride industry maintained relatively high operating rates, but overall oversupply remained the primary factor weighing down prices. However, plant maintenance announcements during the middle and end of the month—such as the planned shutdown of a 240,000-ton/year facility in Shandong and a 160,000-ton/year plant in East China—effectively eased localized supply pressures, helping to fuel two notable price rebounds.

The planned maintenance in November (such as the 380,000 tons/year facility in Shandong scheduled to undergo rotational maintenance starting from November 2, and the 240,000 tons/year facility in East China with a maintenance plan in mid-November) will continue to cause a temporary reduction in supply, which is expected to support stronger price performance. However, it is necessary to closely monitor the implementation of the maintenance plans and the supply recovery brought about by the restart of existing facilities.

Cost Side: Cost support shows divergence

Methanol raw material: High port inventories, ample supply, and weak demand are suppressing the upward momentum of market prices, causing methanol prices to initially rise before declining. As of October 30, the benchmark methanol price stood at 2,212 CNY/ton, down 1.14% from the beginning of the month. This has weakened cost support for dichloromethane. Meanwhile, another key raw material—liquid chlorine—is seeing rising prices due to reduced supply and increasing demand, providing moderate bottom-level support.

Demand Side: Procure on Demand—Surprises Are Rare

The overall demand performance is lackluster, which is the fundamental reason constraining the height of price increases. Downstream sectors maintain a "purchase as needed" model, showing low enthusiasm for procurement. Although the main downstream refrigerant sector provides stable support, the demand for dichloromethane in the pharmaceutical and adhesive sectors continues to be squeezed by substitutes due to environmental policies. A positive signal is that the export volume in September increased significantly by 39.75% month-over-month, which to some extent helps alleviate the pressure of overcapacity in China.

In November, domestic demand in China is expected to continue the weak trend seen in October, with no significant increase in demand expected across various downstream sectors. Therefore, the performance of the export market will become even more crucial, and if it can maintain its growth momentum, it will be a key factor in boosting market sentiment.

Market Outlook:

In October, the dichloromethane market staged a sharp rebound driven by supply-side dynamics, though weak demand capped the extent of the recovery. In November, the market will likely continue its tug-of-war between expectations of shrinking supply and the reality of subdued demand. Key factors to watch include plant operation trends and export conditions.