Supply Contraction Drives Dichloromethane Prices to Remain Stable with a Steady Uptrend

January 27 news

Market Overview: (1.17-1.27)

The dichloromethane market, supported by a proactive reduction in supply, saw a slight upward shift in price levels, presenting a "stable and firm" situation. According to the commodity market analysis system, as of January 27, the average price of dichloromethane in bulk in Shandong region was reported at 1,790 CNY per ton, an increase of 2.43% during the period. The main driving logic of the market has gradually shifted from "weak demand" to the combined effect of "cost support and supply contraction."

Supply Side: Plant Load Reduction Becomes the Key Supporting Factor

During this period, the most significant change stems from proactive adjustments on the supply side:

Concentrated load reduction and decline in operating rates: Major production facilities such as Luxi and Jinling have reduced their loads to 50-70%. As a result, the overall operating rate of the industry has continued to decline from 75.8% in mid-month, effectively contracting the market supply elasticity.

Inventory levels are within a healthy range: manufacturers in China actively control their inventory, while traders generally maintain zero or low inventory. As a result, despite moderate demand, the market has not experienced significant inventory sell-off pressure, providing a buffer for prices.

Cost Side: Double Rising Raw Material Prices Provide Strong Support

Cost pressure has significantly increased, and companies have very little willingness to lower prices:

Methanol prices have risen: Supported by reduced imports, increased ocean freight costs, and rigid downstream purchasing, the methanol market has strengthened. As of January 27, the benchmark price of methanol in China rose to 2,315 CNY per ton, an increase of 2.85% during the period.

Liquid chlorine prices remain firmly high: In the Shandong region, the ex-factory price of liquid chlorine in tank trucks stays at a high level of 350–450 CNY per ton. The simultaneous rise in the prices of both key raw materials has significantly driven up costs for methylene chloride producers, pushing their operations into loss-making territory. As a result, cost factors are providing strong support for dichloromethane prices.

Demand Side: Primarily driven by rigid procurement, which limits the extent of price increases.

Demand failed to resonate with the supply contraction, limiting the height of the market rebound in China.

Downstream on-demand purchasing: The downstream industries are only maintaining rigid demand and have not shown concentrated stockpiling behavior before the Spring Festival, with general market transaction activity.

Market sentiment is cautious: Traders generally adopt a wait-and-see attitude, purchasing in small quantities as needed, leading to weak overall market liquidity and a lack of strong price support from the demand side.

Outlook: A Tug-of-War Between Costs and Demand, Narrow Range Fluctuations Expected

Overall, the market has fallen into a strategic stalemate characterized by “cost-flooring and demand-capping”:

Difficult to rise: Downstream demand is insufficient, and there’s a lack of sufficient trading volume to support price increases, making it challenging for prices to break through resistance levels.

Difficult to fall: Production companies are already on the verge of losses and are stabilizing prices by reducing output; cost support remains solid.

Therefore, it is expected that the dichloromethane market in China will maintain a narrow fluctuation in the short term. Any directional breakthrough in prices will require an unexpected change in demand or a significant adjustment in supply.