Dichloromethane Stabilizes First, Then Collapses

May 29th News

According to SpotCom: In the second half of May, the dichloromethane market in Shandong, China, showed a trend of rising and then falling back, with a weak consolidation. In the first half of the month, due to plant maintenance and a temporary decrease in operating rates, prices rose by more than 14%. However, entering the second half of the month, as plants gradually resumed production and supply was expected to increase, coupled with strong resistance from downstream buyers to high prices, the market gradually turned into a weak pattern. Trading sentiment cooled down, and companies' willingness to sell increased.

As of May 29, the mixed price of dichloromethane in bulk in Shandong, China, was 2175 CNY/ton, a decrease of 7.05% from mid-month.

Core Driver Analysis

Supply side: From tight to loose, pressure is released in a concentrated manner

In the first half of May, maintenance was concentrated, with low operating rates and tight supply pushing prices to high levels. In the second half of the month, as maintenance facilities gradually resumed production, operating rates rose above 80%, and the available supply increased rapidly. However, demand was insufficient due to the high prices, leading to a mismatch in supply and demand, which directly triggered a price correction. Companies then offered discounts to move inventory, further driving down market prices.

Cost side: Cost support has shifted from “weak” to “none.”

In the liquid chlorine sector, some enterprises are facing significant pressure to offload their products, prompting price reductions and shifting the price center downward over the period. The methanol market trend has moved from strong to weak; previously, the market had already reached a high plateau characterized by an inability to pass on rising costs, and downstream buyers are strongly resistant to high prices. As methanol prices fall and liquid chlorine prices decline, this has directly opened up room for methylene chloride prices to drop as well. The cost pressure on enterprises to lower prices and sell their products has significantly eased. Coupled with increased supply and weak demand, a price decline is now imminent.

Demand Side: Mainly Rigid Demand, Resistant to High Prices

In downstream industries such as refrigerants, pharmaceuticals, and coatings, procurement demand remains rigid, with most orders being small-scale and characterized by a wait-and-see attitude, lacking the support of large-scale orders. Under the influence of environmentally friendly alternatives, traditional demand in sectors like coatings continues to remain weak; only pharmaceutical demand remains relatively stable, making it difficult to offset the overall sluggish demand situation.

Spot market trend forecast:

From the analysis of the spot commodity moving average trend signals, the current 10-day moving average of dichloromethane continues to run below the 20-day moving average in China, with the difference expanding negatively, indicating an accelerating downward trend and that the bearish forces are dominating the market.

Looking at the five-day moving averages, on May 23, 26, and 28, the “1/07 Undercut” and “1/30 Undercut” oversold signals were triggered consecutively, indicating that the price has fallen too rapidly in the short term and is significantly oversold, creating clear demand for a technical rebound. On May 28, the price fell to its 10-day low and 20-day low, approaching the support levels of the short-term moving averages, thus increasing the probability of a technical rebound following the oversold condition. However, the medium-term 60- and 90-day moving averages remain at relatively low to mid-levels, suggesting that the overall trend has not yet fully reversed.

Future Market Prediction:

As maintenance facilities gradually resume production, the supply-side pressure is slowly being released; high prices are suppressing the enthusiasm of downstream buyers, leading to insufficient demand; the support from the cost side is weakening. In the short term, dichloromethane is expected to show a weak fluctuation. Attention should be paid to the actual progress of raw material market conditions and facility resumptions.