August 14 news
According to SpotCom: In the first half of August, the dichloromethane market in China as a whole showed a continuous decline and weak operation. The market lacked substantial positive support, with transactions mainly driven by restocking based on rigid demand, and a strong wait-and-see attitude. As of August 14, the mixed price of dichloromethane in bulk in Shandong region was 1,945 CNY/ton, a decrease of 12.39% from the beginning of the month.
Core Driver Analysis
Supply Side: High Production Levels, Ample Supply
The current industry operating rate is maintained at around 80%, with the overall supply side showing a loose performance. During the period, the amount of facility recovery exceeded the amount of losses, and the industry capacity utilization rate continued to rise. Inventory for some companies continues to accumulate, with inventory pressure becoming evident. Although companies are suffering significant losses, there are no clear signs of load reduction recently.
Demand Side: Lack of Follow-Up, Primarily Driven by Essential Needs
Downstream terminal industry demand in China is performing poorly, with overall weak demand from traders and terminal purchases. Transactions within the market are mainly small-scale orders based on immediate needs, lacking large-scale continuous purchasing, which provides limited support for prices. The industry's pessimistic outlook further suppresses the willingness to purchase.
Cost Side: High Costs Under Pressure, Transmission Fails
The price of raw material methanol has stabilized and rebounded, with both methanol and liquid chlorine prices remaining at moderately high levels. However, dichloromethane continues to decline unilaterally. Due to even greater pressure from oversupply, high costs have failed to be effectively passed on to dichloromethane prices, placing significant cost pressure on methane chloride enterprises.
SpotCom Technical Indicator Analysis:
From the analysis of the spot market trend signals, the current 10-day moving average of dichloromethane in China is below the 20-day moving average, with the difference expanding negatively. All moving averages are in a bearish downward arrangement, indicating a clear downward trend.
Looking at the five timeframes—10/20/30/60/90 days and one year—we can see that all of them are currently at low levels. A warning signal: the 30-day timeframe shows oversold conditions. The downward momentum has been fully released, and further downside room is now limited. However, being at a low level does not necessarily mean an immediate reversal.
Overall, in the short term, the market is expected to experience primarily oversold fluctuations. Prices are at the lower end of the entire cycle, triggering an oversold alert; thus, there’s limited room for further substantial declines. Most likely: After a brief, inertial dip, the market will enter a period of low-level oscillations, with occasional small technical bounces likely to occur. However, these bounces are more likely to be corrective in nature rather than signaling a trend reversal.
Future Market Prediction:
In the short term, the fundamental pattern of oversupply in dichloromethane is unlikely to change. On the supply side, the industry's high production levels have not yet seen a significant reduction in output, and there is still pressure for inventory accumulation. Given that some companies are operating at a loss, if these losses continue to increase, it is possible that there may be a passive reduction in production later on, which would be the most significant upward variable for the market. On the demand side, downstream demand remains primarily small-scale and essential, and without a concentrated release of refrigerant or export orders, it will be difficult to form sustained buying support. The cost side, with methanol and liquid chlorine running at high levels, provides a bottom support for the spot price, compressing the space for a substantial decline.
In the short term, the methylene chloride market is expected to remain volatile at lower levels, with a slight risk of further downward exploration driven by inertia. Encouraged by oversold signals, there could be opportunities for a technical rebound, though the rebound’s magnitude will be limited—it will be a correction from over-sold conditions and unlikely to reverse the medium-term weak trend. Key factors to watch include adjustments in manufacturers’ quoted prices, reductions in plant maintenance loads, and signs of concentrated restocking by downstream users.
