Recent Slight Increase in Dichloromethane Prices

December 16 news

Market Overview: (12.9-12.16)

Under the combined force of rising costs and a brief supply contraction, the Chinese dichloromethane market experienced a "pulsatile" rebound. According to the commodity market analysis system, as of December 16, the average price of dichloromethane in bulk in Shandong region was reported at 1,790 CNY per ton, an increase of 6.23% within the week. However, a significant price decrease of 38.8% year-on-year reveals that the fundamental pattern of market supply and demand imbalance has not changed.

In the early stage, the rainy and snowy weather led to a seasonal increase in logistics costs. Additionally, some production facilities in Shandong region voluntarily reduced their load, together forming a short-term positive trend of "cost push + slight supply reduction." This stimulated the stockpiling sentiment of some downstream users and traders, alleviating the inventory pressure on enterprises and enhancing their willingness to maintain prices. As prices rose, the momentum for downstream follow-up purchases weakened, and there was a severe lack of sustainable consumer demand.

Supply Side: Short-term Disruptions Hardly Affect the Overall Loose Situation in China

This week, the reduction in production capacity within the region is the key variable supporting prices. It has alleviated the inventory pressure on companies and sent a market signal of "tightening supply." However, this support is extremely fragile. According to market information, the reduced production facilities have started to slowly recover, and expectations of increased supply are growing. In the medium to long term, China's dichloromethane capacity is ample, and it is normal for the industry's operating rate to remain relatively high. Once temporary production cuts end, the market will once again face supply pressure.

Demand side: weak demand limits the rebound’s height.

Stable support for key demand is lacking: As the largest downstream sector, the refrigerant industry sees its leading companies largely equipped with upstream raw-material facilities, thus limiting their reliance on externally purchased dichloromethane.

Other sectors are generally sluggish: In high-end fields such as pharmaceuticals and electronics, demand is stable but the total volume is limited; in other traditional application areas, they are squeezed by both insufficient macroeconomic prosperity and environmental replacements. Whether it's downstream factories or traders, the general strategy is "procurement based on demand and small-scale replenishment when prices are low." The market lacks speculative and reserve demand, which cannot provide sustained support for price increases.

Cost Side: Raw Materials Rise, Providing Solid Support

Liquid chlorine: Its price first fell and then rose during the price cycle, and currently remains at a relatively high level, placing direct and significant pressure on the production costs of methane chlorides.

Methanol: Market sentiment has improved, with prices stabilizing and rebounding. The reluctance of sellers to part with their stock and the entry of buyers at lower prices have jointly driven a slight increase in prices. As of December 15, the benchmark price for methanol in China was 2102.5 CNY/ton, up 1.08% over the period.

The soaring costs have severely squeezed the profit margins of manufacturing companies, putting them under tremendous pressure when they try to cut prices and reduce inventories. This, in turn, has limited the room for further sharp declines in market prices, creating a "rigid floor." However, it’s important to note that during periods of weak demand, cost support can only prevent prices from plummeting—it cannot, on its own, drive sustained price increases.

Outlook: Weak Consolidation, Awaiting New Variables

In the short term, as production facilities resume operations, the temporary support from the supply side will gradually fade. Meanwhile, there are no signs of improvement on the demand side, leaving the market lacking new upward drivers. Prices are expected to experience a modest pullback from their current rebound highs and seek a new equilibrium around the cost level. Overall, the market is likely to remain in a narrow trading range with a slightly lower center of gravity.