Dichloromethane Rises Sharply by Over 14% in Half a Month

May 15 news

According to SpotCom: In the first half of May, the dichloromethane market in Shandong, China, showed a strong upward trend with significant price increases and plateauing at high levels. As of May 15, the mixed price for dichloromethane in bulk in Shandong was 2,340 CNY/ton, an increase of 14.99% from the beginning of the month.

Core Drive Disassembly

Cost Side: Price increases diverge from rising costs, and support is gradually weakening.

This round of market conditions in China exhibits a typical divergence characteristic of "rising prices and falling costs."

Methanol raw material: In the first half of May, prices fell by more than 5%, in stark contrast to the 14.99% price increase of dichloromethane, indicating that costs are not the primary driver behind this round of price hikes.

Liquid chlorine market: As the operating rates of chlor-alkali enterprises rebound, the price center of liquid chlorine has shifted slightly downward, and the cost support for integrated chlor-alkali companies has further weakened.

Corporate profits: With costs weakening and prices surging, the profit margins of dichloromethane producers have significantly expanded, boosting their willingness to hold prices in the short term. However, cost-side support for future market trends has noticeably weakened.

Supply side: Maintenance + low inventory, short-term available supply is tight in China

The phased contraction on the supply side is the core support for this round of market rally.

Plant maintenance: Some dichloromethane facilities in Shandong, Jiangsu, and other regions of China have entered routine maintenance, leading to a temporary decline in the industry's operating rate and a reduction in the available supply in the market.

Low Inventory Levels: Social inventory continues to remain at historically low levels in recent years, putting little pressure on corporate inventories. As a result, sellers are reluctant to sell and are firmly holding prices, while traders’ demand for restocking further amplifies the upward pressure on prices.

Mid-term outlook: As maintenance units gradually resume production, the industry’s operating rate is expected to pick up steadily starting from late May, and supply-side pressure will gradually ease.

Demand Side: Post-holiday essential demand is being released in concentrated fashion, while high prices continue to dampen the sustainability of transactions.

The demand side exhibits the characteristics of “short-term concentration and long-term weakness”:

Strong underlying demand: After the holiday, downstream industries such as refrigerants (R32), coatings, and pharmaceutical intermediates have resumed work in a concentrated manner, leading to a temporary surge in procurement demand and providing fundamental support for price increases.

High Price Resistance: As prices quickly surpassed the 2300 CNY/ton threshold, downstream enterprises in China showed a significant increase in resistance to high prices. Transactions were mainly small orders based on immediate needs, lacking large-scale continuous purchases, which gradually weakened the driving effect on prices.

Segmented fields: The refrigerant industry is primarily focused on supporting procurement, with limited new orders; demand in the traditional coatings and pharmaceutical industries remains sluggish, still showing a slight year-on-year decline, providing only limited support for prices.

SpotCom Moving Average and Position Model Analysis:

From the analysis of the spot market moving average trend signals, the current 10-day moving average of dichloromethane in China continues to be above the 20-day moving average, and the difference between them is continuously expanding, entering an accelerated upward phase. However, the price increase has noticeably slowed down, indicating that the upward momentum is weakening at the margin.

Looking at the five-period moving averages, as of May 14, prices are at the high end for the 10-day and 20-day periods, at the median for the 30-day period, and at the low-to-mid range for the 60-day period. This indicates that the short-term upward momentum (10-20 days) has been fully exhausted, leaving limited room for further gains. In the medium term (30-60 days), prices remain in a neutral range, with no clear signals yet of a trend reversal.

Market Outlook: High-level fluctuations with a weak bias, mid-term pressure leading to a decline

In the first half of May, the dichloromethane market in China experienced a one-sided increase of over 14% driven by a temporary imbalance in supply and demand. Although the technical indicators still show a bullish trend, there are signs of weakening upward momentum and short-term overvaluation. Subsequently, as the supply pressure eases and the high prices start to suppress demand, the market is likely to enter a phase of high-level fluctuation with a weaker bias. In the medium term, there is pressure for prices to fall, and close attention should be paid to the progress of plant resumption, fluctuations in raw material prices, and changes in downstream demand.