Cost Floor and Demand Constraints: Dichloromethane in Volatile Consolidation

April 17 news

According to SpotCom: In the first half of April, the Chinese dichloromethane market exhibited characteristics of cost-driven increases, demand support, and a rapid decline after peaking. As of April 17, the mixed price of dichloromethane in bulk in Shandong region was 2,457 CNY/ton, down 6.2% from the beginning of the month.

Fundamental Analysis

Cost Side: Raw material price increases far exceed those of finished products, significantly squeezing industry profits.

Methanol prices increased by up to 18% in the first half of the month, while the maximum increase for methylene chloride during the same period was only 7.33%, leading to a severe lack of cost transmission, and manufacturers' profit margins were quickly squeezed. The price of liquid chlorine also rose significantly, further increasing production costs for enterprises. However, terminal demand was unable to absorb the cost pressure, leaving companies in a dilemma where they "can't sell at higher prices but lose money if they lower them."

Supply and Demand: Weak demand is the core driver behind this round of price declines.

Downstream rigid demand is insufficient: Orders from downstream industries such as refrigerants, pharmaceuticals, and solvents have not seen significant improvement. The willingness to purchase at high prices remains low, with the just-in-time procurement model becoming the mainstream. This cannot support the continuous high price levels.

Inventory pressure forces sales: The price increase, which was previously supported by low inventory, did not stimulate a significant increase in demand after the price surged. As inventory passively accumulated, companies accelerated sales by lowering prices, directly causing a rapid decline in prices.

Export bottlenecks: Shipping disruptions in the Middle East continue to affect export orders, and insufficient external demand is failing to offset this shortfall, further exacerbating the imbalance between supply and demand in the Chinese market.

Spot Market Trend Forecast:

From the spot Tong price curve, it can be seen that at the beginning of the month, the 10-day moving average of dichloromethane crossed the 20-day moving average from bottom to top, signaling the start of an upward trend. Currently, the moving averages are still trending upwards, but the slope of the 10-day line has slowed down, and the gap between the lines has narrowed, indicating a marginal decrease in the momentum of the rise. The trend is shifting from a one-sided increase to a consolidation phase.

Combining the five-level positions, the two "1/07 crossover" warnings indicate that the short-term correction signals after a significant rise are recurring; the 30-day position has entered a high level, indicating that the mid-term trend has entered a relatively strong interval, with limited subsequent upward space; the 10-day position has fallen from a high level to a medium level, and the narrowing of the moving average spacing indicates that the short-term bullish momentum has weakened, and it is likely to enter a consolidation phase subsequently.

Future Market Forecast: A Volatile Pattern Underpinned by Cost Floor and Constrained by Demand

Combining the characteristics of the surge and subsequent decline in the first half of April, along with the fundamental situation of strong cost support and weak demand recovery, it is expected that the short-term Chinese dichloromethane market will mainly experience high-level consolidation, with both the risk of a pullback and cost support coexisting. The overall performance will be a weak equilibrium characterized by difficulty in both rising and falling.