Dichloromethane 2025 Review and 2026 Outlook — Carrying Forward, Stalemate Persists

January 4th, News

In 2025, the Chinese dichloromethane market was mired in a triple dilemma of "high supply, weak demand, and low profit," with prices hitting a historic decline. The pressure for industry adjustment accumulated comprehensively. 2026, as a critical year for the transformation of the supply and demand landscape, will continue the weak tone of the market. However, under the multiple influences of optimized supply structure, intensified demand differentiation, and reshaped cost transmission, the market will exhibit new characteristics of "change within weakness and intensified differentiation," making it difficult to see a trend reversal.

I. 2025 Market Review: The Core Logic Behind the Deep Bottoming Process

2025 was a year of concentrated contradictions in the dichloromethane industry, with the overall market trend characterized by "unidirectional decline and weak rebound," setting the foundation for the 2026 market with a "supply-demand imbalance dominance and ineffective cost support."

(1) Price Trends: Historic Breakout, Weak Rebound.

• Deep Dive to Record Lows: Market prices in Shandong have continued to decline from their year-to-date highs, falling below the critical threshold of 2,000 CNY/ton in the fourth quarter and reaching a historic low of 1,662.5 CNY/ton. The year-on-year price decrease exceeded 41%, and prices remained at low levels at year-end.

(2) Core Driver: Driven by supply-demand imbalances, cost advantages become ineffective.

• Supply side: High production rates + new capacity, leading to continued supply relaxation. The industry's operating rate remains in the high range of 65%-86%. New capacities in Hengyang, Hunan; Yonghao and Tai in Shandong; and the expansion of Yonghe in Huichang have further increased production. At the same time, due to environmental policy constraints and the requirement for stable operation of facilities, companies have limited room for voluntary production cuts, resulting in insufficient supply elasticity and continuous market pressure.

• Demand Side: Structural divergence and overall weak demand. As the largest downstream application, refrigerant R32—accounting for approximately 41% of total demand—saw its annual demand increase by 5.11% to 505,000 tons, serving as the sole source of rigid support. However, since its procurement is primarily internal and self-sufficient, it fails to generate external demand-driven growth. Traditional sectors such as pharmaceuticals, solvents, and metal cleaning experienced year-on-year demand declines ranging from 8% to 15%, compounded by the squeeze from substitutes like dichloroethane, resulting in weak overall domestic demand support. Although exports surged by 44.4% year-on-year, mainly directed toward emerging markets such as Turkey and Vietnam, this surge essentially reflects a passive absorption of China’s excess production capacity rather than an active expansion of demand.

• Cost Side: Positive factors are widespread, yet their transmission has failed. The average annual price of methanol, the raw material, was 2,403.12 CNY/ton (down 6.24% year-on-year). The price of liquid chlorine has continued to weaken, even falling into a negative-price trap, providing some cost cushion for dichloromethane. However, the severe supply-demand imbalance has completely offset this positive effect; the decline in costs has not translated into higher profits, merely highlighting the dominant role of the supply-demand contradiction.

II. 2026 Market Outlook: Primarily Characterized by Weak Volatility, with Prominent Structural Opportunities

In 2026, the dichloromethane industry will continue the adjustment logic of 2025, but new variables will arise from the optimization of the supply structure, pressure on export demand, and increased cost differentiation. The core characteristics of the market for the entire year will be "marginal improvement in supply, increased demand differentiation, blocked cost transmission, and weak price fluctuations."

(1) Supply Side: Slowing Expansion + Capacity Elimination—The Degree of Restraint Is Marginalizing.

In 2026, the supply side will continue the high production capacity base of 2025, but "slower expansion + phasing out of outdated capacity" will alleviate some of the pressure, becoming the core driving force for marginal improvement in the market.

• Limited new capacity addition: Following the increase in total methane chloride capacity to 4.12 million tons/year by 2025, the industry’s expansion momentum significantly slowed down in 2026. Several planned projects have experienced delays, and only a few—such as the Gansu Juhua project—are likely to move forward. As a result, the impact of newly added capacity on the market has substantially diminished.

• Accelerated elimination of outdated capacity: At the policy level, facilities operating for over 20 years face pressure to undergo green upgrades or be phased out; at the market level, low prices and losses in 2025 will challenge the survival of high-cost enterprises, and small and medium-sized facilities lacking industrial chain support and with outdated technology will be forced to exit, leading the industry to concentrate on integration and high-end development.

• High operating rates persist: Although capacity elimination continues, unless there are large-scale, long-term shutdowns or significant capacity withdrawals, the industry’s high operating-rate situation will likely persist, remaining the core factor weighing on prices. Supply pressure will only ease temporarily during periods when companies proactively reduce production or during concentrated plant maintenance periods.

(2) Demand Side: Rigid Floor Support + Export Pressure—Overall Volume Struggles to Break Through

In 2026, the demand side will continue the differentiated pattern of 2025. R32's rigid demand will provide a base, but the shrinkage in traditional sectors and the slowdown in export growth will constrain overall growth. Demand will still be "supported but lack highlights."

• Steady and rising rigid demand: The 2026 production quota for refrigerant R32 is approximately 282,000 tons, corresponding to a dichloromethane consumption of about 5.07 million tons—a slight year-on-year increase of 0.4%. R32 continues to play the role of a “stabilizing anchor” in the market; however, the internal supply-and-purchase model still struggles to drive external market demand.

• Traditional demand is accelerating its decline: Foaming agents will be completely banned starting January 1, 2026; aerosol propellants and certain mold-release agents are subject to policy restrictions. Meanwhile, the traditional solvent sector continues to see its market share eroded by low-toxicity, environmentally friendly alternatives, leading to a permanent reduction in demand. Demand in sectors such as pharmaceuticals and metal cleaning will remain sluggish.

• Export growth slows, policy risks emerge: Exports remain a key channel for absorbing excess capacity, but the growth rate in 2026 is expected to slow significantly from 44.4% in 2025; at the same time, dichloromethane has been added to the list of controlled chemicals for export, and countries such as the United States, Mexico, and Canada have been added to the list of specific controlled regions, increasing the cost of export compliance, which may constrain export growth in some markets. The market focus needs to continue shifting towards emerging markets such as Turkey and Vietnam.

• Limited growth in emerging demand: Although demand in emerging fields such as wet-process battery separators and fine chemicals has been increasing, their share of total consumption remains low. As a result, they cannot offset the contraction in traditional sectors, and their overall impact on market trends is minimal.

(3) Cost Side: Differentiation Intensifies, and the Advantages of Integrated Enterprises Become More Prominent

In 2026, the cost side will continue the differentiation logic of 2025. Methanol price fluctuation will provide phased support, and the integrated advantage of the liquid chlorine process will be further amplified. The efficiency of cost transmission will still be constrained by the supply and demand situation.

• Methanol: Phase-specific cost support: The central price of methanol is expected to range between 2,100 and 2,300 CNY per ton in 2026. Its price fluctuations closely track the long-term trend of the dichloromethane index, demonstrating a significant cost transmission effect. However, against the backdrop of oversupply, it will be difficult for rising methanol prices to fully pass through to end-user prices of dichloromethane; instead, methanol prices can only establish a temporary cost floor at lower levels.

• Liquid Chlorine: Integrated enterprises continue to enjoy benefits: The liquid chlorine industry in China will continue to face overcapacity and weak demand, with prices likely to remain low. Integrated enterprises with their own chlor-alkali facilities will continue to benefit from cost advantages, allowing them to operate stably even during periods of industry losses. In contrast, companies that rely on external procurement of liquid chlorine will face increasing cost pressures, leading to a continuous compression of their profit margins.

(4) Price Trend Forecast: Weak fluctuation, range-bound movement

Considering the factors of supply and demand, cost, and policy, the dichloromethane market in China in 2026 will continue the weak trend from 2025, with the price center possibly slightly lower than in 2025, presenting a pattern of "low-level fluctuation, difficulty in sustaining a weak rebound."

• price range: It is expected that the price will fluctuate between 1,700 and 2,300 CNY/ton throughout the year. The low point will be close to the historical low of 2025, while the high point, due to supply and demand imbalance, will struggle to exceed 2,500 CNY/ton.

• Volatile Rhythm: During periods of concentrated plant maintenance and phased increases in exports, prices may experience a temporary rebound of 2% to 5%. Conversely, during the traditional off-season—when production capacity is fully released and demand remains sluggish—prices will revert to a weak, downward trend.

III. Summary and Outlook

The deep bottoming out in 2025 accumulated sufficient adjustment pressure for the dichloromethane industry. In 2026, as a critical year of transformation, the industry will enter a new phase of "accelerated capacity clearance and deepened structural optimization," but the core contradiction of supply and demand imbalance will be difficult to fundamentally resolve.

The core conclusion for the annual market trend is: the main pattern will be a weak fluctuation, with structural opportunities replacing overall growth. Prices will find it difficult to show a trending increase, and there will only be phased recovery opportunities; at the level of corporate competition, leading enterprises with integrated chlor-alkali production, technological advantages, and smooth export channels will continue to seize market share, while small and medium-sized, high-cost capacities will accelerate their exit, further increasing the industry's concentration.

For market participants, producers need to control inventory and focus on high-end products; traders need to seize the window of opportunity for phased rebounds, buying and selling quickly; downstream enterprises can purchase according to their needs and pay attention to substitution opportunities. In the long term, the industry needs to wait for signals of large-scale supply-side contraction or unexpectedly strong growth in exports to truly emerge from the bottom range and enter a new equilibrium cycle.