Supply Contraction Drives Dichloromethane Prices Up in China

November 7th News

Market Overview: (11.1-11.7)

According to the commodity market analysis system, as of November 7, the average price of methylene chloride in bulk in Shandong region was 1910 CNY/ton, an increase of 6.26% from the beginning of the month, successfully stopping the decline and rebounding. However, compared to the same period last year, the price has still significantly dropped by 33.8%, reflecting that although there are short-term positive factors, the overall weak market situation has not fundamentally changed. At the beginning of November, the methylene chloride market in China attempted to recover from its weakness driven by a reduction in supply, but weak demand limited the upward potential.

Supply Side: Supply contraction is the main driver of price increases.

The operating rate of China's methylene chloride industry has decreased significantly, with many major companies frequently shutting down or reducing their load. The overall operating rate of the industry has dropped to around 65%, and as a result, company inventories have fallen to low levels, providing a solid foundation for market price support.

The operational status of the company's facilities is as follows:

Demand Side: Insufficient Demand Constrains Market Performance

In stark contrast to the robust activity on the supply side, demand remains sluggish. Overall demand is weak, with downstream industries at the terminal end holding significantly high inventory levels—leaving both their ability and willingness to take in more goods severely limited. Market transactions are largely driven by rigid, essential purchasing needs, while traders and downstream manufacturers show little appetite for chasing higher prices at this juncture. As a result, although reduced supply has pushed prices upward, the lack of substantial, real-world demand means the price rally lacks a solid foundation.

Cost Side: Raw material trends diverge, limiting overall support.

Methanol: As a primary raw material, the methanol market in China is facing continuous pressure from high port inventories, high supply, and weak demand, leading to downward price pressure. As of November 7th, the benchmark price for methanol was 2,155 CNY/ton, down 2.78% during the period. Although there are recent expectations of reduced supply that have prompted a slight rebound in prices, the pattern of wide-ranging fluctuations at low levels has weakened the key cost support for dichloromethane.

Liquid chlorine: Prices in the Shandong region initially fell before rebounding, with overall shipment volumes remaining decent, providing a mild floor of support for dichloromethane.

Outlook for the Future:

In early November, the dichloromethane market in China rebounded driven by proactive production cuts. In the short term, the tight supply situation is expected to continue, providing support for prices, and the market may maintain a relatively strong and volatile trend. However, further price increases urgently need support from the demand side. If downstream inventories are not effectively digested, the sustainability of the current upward trend will face challenges.