Post-Holiday Sharp Drop in Dichloromethane—Quick Repair

February 27 news

Market Overview: Flash Crash and Recovery

After the Spring Festival, the dichloromethane market in Shandong experienced a sharp price decrease, with a single-day drop of up to 7.11%. Subsequently, it quickly stabilized and rebounded continuously in the latter part of the week, completing a rapid inventory clearance and price recovery.

According to the commodity market analysis system, as of February 27, the mixed price of dichloromethane in bulk in Shandong region was 1,720 CNY per ton, a decrease of 3.77% compared to before the Chinese New Year.

Supply Side: High inventory is one of the core reasons for the sharp decline in the market after the Chinese New Year.

During the Spring Festival, enterprises in China continued to operate normally, but logistics were suspended, leading to a continuous accumulation of inventory. After the festival, when production resumed, the inventory pressure was released all at once. Most production enterprises chose to actively lower prices to reduce inventory, resulting in a single-day price decrease of over 7%. As the low-priced goods quickly reduced the inventory, the inventory pressure eased, and enterprises' willingness to hold prices firm increased, with quotes gradually being tested for increases. Some major facilities in Shandong resumed operations, and the industry's operating rate returned to around 80%.

Demand Side: Three Factors Converge, Bottom-Fishing Demand Concentrates and Releases

Post-holiday restocking: After the Spring Festival, downstream factories and traders in China gradually resume production and operations, leading to a rigid demand for replenishment.

Bargain-hunting mentality: After prices fell sharply to their lowest levels of the year, it greatly stimulated the inventory preparation intentions of intermediaries and some end-users in China, significantly increasing market transaction volumes and forming an effective support.

Export support: The steady execution of overseas orders has also provided an important channel for absorbing China's excess production, accelerating the inventory reduction process.

Cost Side: Bottom support weakens, creating room for price adjustments.

Liquid chlorine: In some regions of Shandong, liquid chlorine inventories remain high, and downstream operations have not yet fully recovered. The trend in the liquid chlorine market is downward, with tank truck ex-factory quotes falling below 1 CNY/ton. The collapse in liquid chlorine prices has directly weakened the cost support baseline for methylene chloride enterprises, providing room for price reductions and profit concessions.

Methanol: The sentiment in the methanol market is weak, with high supply pressure and cautious downstream purchasing, leading to short-term pressure on the market. On February 27, the benchmark price of methanol was 2185.83 CNY/ton, a decrease of 0.7% compared to before the Chinese New Year, having a relatively limited impact on the cost of dichloromethane.

Outlook for the Future:

The current market is in a phase of competition characterized by "low inventory, recovery of rigid demand, and weak cost." As full resumption of work downstream occurs after the Lantern Festival, demand is expected to continue to be steadily released. It is projected that the dichloromethane market in Shandong will maintain a relatively strong and volatile situation in the short term. However, without strong support from the cost side, the subsequent rebound space needs close attention to the acceptance of the current price increase by downstream consumers and the inventory change situation of the major manufacturers.