November dichloromethane weak operation in China

November 28th News

Market Overview:

As of November 28, according to monitoring data, the average market price of dichloromethane in bulk in Shandong region is 1695 CNY/ton, with a price decrease of 5.7% within this month. Compared to the same period last year, the price has significantly dropped by 41.35%, and the overall market shows a weak trend.

This month's market trend has been volatile: In the first ten days, driven by a contraction in supply, the market successfully stopped falling and rebounded, with prices rising by 6.26% at one point. However, due to the continued weakness in terminal demand, the room for price increases was limited. Entering the middle and late part of the month, as supply pressure increased and cost support significantly weakened, the market returned to a downward trend, with the price level continuously declining.

Supply Side: Operating Rate Fluctuations Drive Prices, Inventory Pressure Triggers Competition

Supply contraction drives rebound: At the beginning of the month, several mainstream production facilities in China frequently shut down or reduced their operating loads, causing the overall industry operating rate to drop to a low of around 65%. The significant reduction in supply lowered corporate inventories to low levels, providing a solid foundation for price support and successfully driving a price rebound.

Supply recovery suppresses the market: As the operating rate gradually recovers to around 78%, the supply of goods in the market significantly increases. Consequently, inventory pressure for companies continues to build up. In order to secure limited orders and alleviate inventory pressure, manufacturers adopt price-cutting promotional strategies, leading to intensified market price competition. This becomes the main driving force behind the price decline in the middle and late part of the month.

Demand Side: Both domestic and external demand are weak, constraining the market’s upside potential.

Domestic demand remains sluggish: Downstream sectors such as refrigerants, pharmaceuticals, and agrochemicals have shown lackluster performance. Purchases are mostly driven by rigid demand and small orders, with little intention to build up large inventories. End-user downstream industries generally hold high inventory levels, and their ability and willingness to take delivery are both limited. Although the reduction in supply once temporarily pushed prices higher, without solid support from a surge in actual demand, the upward price trend lacks a firm foundation.

External demand remains stable but has limited impact: In October, China’s export volume of dichloromethane reached 18,850.28 tons, representing a slight month-on-month increase of 0.11% and demonstrating steady performance. However, given China’s massive supply volume, the relatively small export scale struggles to absorb the surge in production, making it impossible to reverse the negative outlook brought about by weak domestic demand.

Cost Side: Collapse of raw material support weakens price floor

The methanol market is under pressure and declining: As a major raw material, the methanol market in China faces persistent pressure from high port inventories, high supply, and weak demand, leading to overall price pressure. Although there are short-term fluctuations and some strength due to expected natural gas restrictions and coal price support in the latter part of the month, the fundamental weakness has not changed. This month, the benchmark price of methanol fell by 2.4% to 2103.33 CNY/ton. The continuous decline in raw material costs has eroded the price floor of dichloromethane.

The liquid chlorine market lacks strong support: This month, the Shandong liquid chlorine market has experienced volatile price fluctuations, with frequent price swings and an overall weak trend, making it difficult to provide effective and sustained cost support for dichloromethane.

Outlook for the Future:

Overall, the current dichloromethane market in China is dominated by negative factors:

Supply pressure still exists: The industry's operating rate has recovered to a relatively high level, and if the current load is maintained, the market supply will remain abundant.

Demand is unlikely: The downstream industries in China generally show a lackluster performance, and the possibility of a significant recovery in demand in the short term is low, which will continue to constrain the market's upward trend.

Cost support is weak: The domestic methanol market fundamentals are relatively weak, and it is expected that strong cost support will not be formed in the short term.

Therefore, it is expected that the dichloromethane market in China will continue to face downward pressure in the short term, with a weak trend prevailing. Subsequently, close attention should be paid to changes in the prices of upstream raw materials, the operational dynamics of major factories, and adjustments in production loads. Any significant change in any of these factors could become the key variable to break the current stalemate.