Supply and Demand Drag Down Methylene Chloride in a Cliff-like Decline

April 29 news

According to SpotCom: In the second half of April, the Chinese dichloromethane market showed a cliff-like decline, with low-level narrow fluctuations. As of April 29, the mixed price of dichloromethane in bulk in Shandong region was 2,035 CNY/ton, a decrease of 17.19% from the beginning of the month.

Fundamental Analysis

Cost Side: Cost inversion intensifies, putting downward pressure on dichloromethane.

The situation in the Middle East has not eased, and imports are tight. After a mild decline, the methanol market stabilized and rebounded, with prices unlikely to fall sharply. Liquid chlorine remains at high levels of fluctuation, and companies have a strong intention to maintain prices. Although raw material prices have declined somewhat, they remain generally firm. However, the price of dichloromethane has plummeted, significantly increasing the cost inversion for companies. The main reason is the imbalance between supply and demand (high production + high inventory + weak demand), leading to passive price reductions to reduce inventory.

Demand Side: Weak Domestic Demand, Hindered Exports, and High Prices Curbing Transactions

Weak domestic demand: While the demand for refrigerants and pharmaceutical intermediates remains steady due to their essential nature, downstream sectors such as sponge, coatings, and adhesives are experiencing insufficient orders. Under these high-price conditions, buyers are adopting a cautious approach, primarily opting for just-in-time procurement.

Export Bottlenecks: The prosperity of export markets has already begun to decline from its previous high levels. In March 2026, the export volume of dichloromethane reached 15,705.94 tons, up 19% month-on-month but down 32% year-on-year. Ongoing shipping issues in the Middle East continue to affect export orders; coupled with high prices, the capacity to divert exports has weakened, further exacerbating the imbalance between supply and demand in the Chinese market. Given that shipping problems are unlikely to be resolved in the short term, exports will find it difficult to achieve significant growth.

Supply Side: High Production + Inventory Accumulation, Large Pressure to Ship Goods

Operating Rate: The industry maintains a high operating rate of around 80%. With the release of new capacity from Henan Jinhai, supply continues to remain ample. Inventory: In the first half of the month, price cuts had limited effect on reducing inventory levels. By the middle and late part of the month, corporate inventories rebounded to medium-to-high levels, putting downward pressure on prices as companies were compelled to offer discounts and promotions to clear their stock. Under losses, enterprises find it difficult to significantly cut production. As of early May, inventories remained relatively high, and traders’ willingness to sell increased, further restraining upward price movements.

Spot market trend forecast:

From the spot price curve, it can be seen that the current 10-day moving average of dichloromethane in China is below the 20-day moving average, and the downward trend is still continuing. The difference between the averages is decreasing negatively, indicating a deceleration in the decline.

Looking at the five-day moving average, the price is at the lower end of the 10/20/30-day range and at the lower end of the 60/90-day and one-year ranges, indicating that the current price has fallen to the bottom range of the recent period, and the downside potential is thus somewhat limited.

Future Market Forecast:

Dichloromethane is experiencing short-term low-level fluctuations, with limited rebound potential and solid support on the downside. Strong cost support, weak demand constraints, and high supply pressure have created a fragile equilibrium characterized by "difficulty in further rising and limited room for deeper declines."