How Is the Middle East Situation “Bisecting” the Dichloromethane Market?

March 5 news

Recently, geopolitical conflicts in the Middle East have continued to escalate, disrupting shipping routes through the Red Sea and the Strait of Hormuz and causing sudden tension in the global energy and chemical markets. For the dichloromethane industry, this geopolitical conflict has created a rare "two-way squeeze": On the one hand, the price of methanol—the key raw material—has surged due to concerns over Iranian supply, while liquid chlorine prices have also risen sharply, putting significant upward pressure on costs. On the other hand, the Middle Eastern market—a key export destination accounting for 22.3% of total exports (covering 14 countries with a total value of 132 million yuan)—faces risks of delayed shipments, rejected deliveries, and even complete export stagnation. The opposing forces of rising costs and obstructed exports have plunged the market into a complex dilemma: "Prices can rise without demand, but lowering prices comes with costly consequences."

According to the commodity market analysis system, as of March 5, the mixed price of dichloromethane in bulk in Shandong region, China was 2,095 CNY per ton, a significant increase of 19.37% from the beginning of March.

I. Cost-side Resonance: A Sharp Rise in Raw Material Prices Solidifies the Price Floor

The production cost of dichloromethane is driven by both liquid chlorine and methanol. In this round, the Middle East situation has triggered a sharp surge in raw material prices via energy channels, creating strong cost support.

Methanol-wise, Iran is the world's second-largest methanol producer, with an annual production capacity of approximately 17,000,000 tons, accounting for 59% of China's methanol import volume. Due to the impact of geopolitical conflicts in the Middle East, shipping of Iranian methanol has been disrupted, leading to a tightening expectation of import supply. Coupled with rising energy prices driving up costs, methanol prices have surged, further increasing the production cost of dichloromethane. On March 5th, the benchmark price of methanol was 2,500 CNY/ton, a 13.64% increase from early March.

In terms of liquid chlorine, the downstream facilities in Shandong region have increased their load operation, leading to a concentrated release of demand, which has significantly driven up prices. The ex-tanker quotations have risen rapidly, with a significant increase in cost support. The ex-tanker quotations have increased from 100-150 CNY/ton at the beginning of March to 100-400 CNY/ton. The upward trend of the two major raw materials has quickly pushed up the cost line for dichloromethane.

II. A Comprehensive View of Export Impacts: Nearly One-Quarter of Export Volume Faces Shipping Risks

Based on the 2025 dichloromethane export data, the situation in the Middle East has significantly impacted China's dichloromethane exports, with clear characteristics of influence.

Scale of Impact: A total of 14 countries have been affected, involving export amounts totaling 132 million yuan, accounting for approximately 22.3% of total exports. Nearly one-quarter of export business is directly exposed to shipping disruptions.

Risk Structure: The risk exhibits characteristics of “high concentration and extreme outliers.” Turkey, the United Arab Emirates, Saudi Arabia, and Egypt together account for more than 90% of the affected amounts and serve as the primary carriers of shipping risks. While countries such as Iran, Israel, and Yemen have relatively low shares in export volumes, their default risks are extremely high, with frequent occurrences of issues like ship companies refusing to carry goods, schedule delays, and port congestion, significantly increasing the difficulty of order fulfillment.

Logistics Impact: Restrictions on passage through the Red Sea and the Strait of Hormuz have led to widespread delays of 10 to 15 days in scheduled sailings on related shipping routes. As a result, ocean freight rates and insurance costs have surged significantly, directly driving up export costs. The pace of deliveries from overseas has slowed down, and export shipments have encountered temporary bottlenecks.

III. Market Contradictions: The Game Between Rising Costs and Export Constraints

The current dichloromethane market exhibits a typical “double-edged sword” effect:

Bullish supports: High methanol/liquid chlorine costs + Low inventory levels among Chinese companies + Bullish market sentiment

Negative factors weighing on the market: constrained demand in core export markets + rising logistics costs + uncertainty surrounding overseas orders

If the export channels are blocked, the goods originally intended for export will be forced to flow back into China, increasing the supply pressure in China and, in turn, suppressing price increases.

4. Future Market Outlook

In the short term, the situation in the Middle East remains uncertain, with shipping risks and high raw material prices expected to persist. The logic of cost support and export disruptions has not disappeared, and the price of dichloromethane is likely to remain relatively strong. In the medium term, it will be important to closely monitor the progress of shipping recovery, the strength of downstream demand recovery, and fluctuations in raw material prices. If geopolitical conflicts ease and export logistics recover, prices may gradually return to rational levels, but the cost floor has already risen significantly, and the overall market center has shifted noticeably higher compared to earlier periods. If the situation in the Middle East does not improve, the impact of export disruptions will become more apparent, potentially leading to an accumulation of port inventory, which could limit upward price movements.