Cost Becomes the Core Driver of Market Trends: Dichloromethane Market Weakens Initially, Then Strengthens

Lead: This week, the dichloromethane market first fell and then rose, with the market logic shifting from supply-demand driven to cost driven. At the beginning of the week, the dichloromethane market weakened and declined. With a lack of substantive support from end users, downstream players and traders bought only on a need-to basis, and follow-through in market trading was insufficient. Under shipment-led pressure, holders sold at lower prices. However, during this week, feedstock methanol rose sharply, and liquid chlorine moved up from a low level, significantly increasing the cost pressure on methane chloride producers and worsening their losses, prompting producers to support prices. Amid downstream “buy on rises, not on falls” sentiment, trading enthusiasm improved somewhat, and downstream players and traders followed up fairly well. This week, the weekly average price of dichloromethane in Shandong was RMB 2,207/t, up RMB 36/t from the previous week, an increase of 1.66%.

From late last week to early this week, the market continued its downward trend, with the overall market moving lower. End-user industries lacked substantive positive support, downstream operating rates remained normal, overall consumption momentum was insufficient, sentiment in the market was cautious, buying was mainly need-based, and there was no concentrated restocking. Holders adjusted their offers according to their own shipment and inventory conditions, showed a strong willingness to sell, and actively cut prices. During the period, clear changes occurred on the feedstock side: the methanol market rose sharply, and liquid chlorine prices trended higher amid volatility. With both feedstocks rising simultaneously, cost pressure on methane chloride producers increased, industry losses further worsened, and producers’ shipment mentality shifted. Coinciding with production cuts at some enterprises, the regional operating load declined. Producers made strong efforts to support prices, and some controlled volumes to protect prices, laying the foundation for a bottoming-out and rebound. As factories supported prices and low-priced supply gradually disappeared, market sentiment recovered rapidly. Downstream players and traders, tending to buy on rises rather than falls, saw previously wait-and-see customers gradually enter the market to purchase. Trading enthusiasm improved markedly. With downstream need-based procurement plus moderate restocking by traders, transaction follow-through in the market was fairly good, driving dichloromethane prices to rebound.

During the period, the Dongyue unit was brought to full load and then operated at reduced load again, while Jiuhong’s 240,000 t/a unit reduced load in the latter half of the week. As overall restored volume exceeded lost volume, output and capacity utilization rose. Looking to next week, Dongyue and Jiuhong units will continue to reduce load, and other units have no clear startup or shutdown plans. Therefore, domestic methane chloride output and capacity utilization are expected to trend downward next week. During the month, operating rates in Shandong remained at a medium-to-low level, providing some support for the market rebound.

On the cost side, supported by strong macro sentiment during the week, tight spot circulation in inland markets combined with stocking demand for the dual festivals fostered a buy-on-rises mentality, pushing methanol prices sharply higher. Liquid chlorine feedstock also rebounded from the bottom, driven by active downstream restocking. With both major feedstocks for methane chloride rising together, cost pressure remained high. In this period, the weekly average cost of methane chloride was RMB 2,335/t, up RMB 174/t from the previous period, an increase of 8.05%. The weekly average profit of methane chloride was RMB -345/t, down RMB 79/t from the previous period, a decline of 29.70%.

Domestic Methane Chloride Cost and Profit Comparison Table (Unit: RMB/t)

The overall market trading atmosphere showed periodic variations, and end-user operating conditions changed little from the previous period, exerting bottom-up restraint on the dichloromethane market trend. The mainstream quotation in the East China market was referenced at RMB 63,500–64,500/t. As of press time, affected by seasonality, industry demand has turned weaker. Producers slowed their pace to control the base of spot output. During the export “window period” in the foreign trade market, the supply side actively exported volumes to ensure quota completion rates. According to statistics, the operating rate of the fluorinated refrigerant R32 industry fell by 1 percentage point week on week during the week. At present, balancing limited demand space is a better choice than running at high rates and building inventory.

Refrigerant R32 Weekly Operating Rate Comparison Table

Overall, next week there are no clear startup or shutdown units. Output is expected to decrease from this week, and enterprise inventories in the region are under no pressure. In addition, after earlier restocking and given the restraining effect of high dichloromethane prices, downstream players and traders are expected to show average enthusiasm for taking cargo next week, and demand-side support will weaken. In summary, with no inventory pressure on regional enterprises and feedstock prices still running at high levels, supported by news, the domestic dichloromethane market is expected to retain some upside in the short term. However, after prices are pushed to a high level, insufficient downstream follow-through and limited market trading will restrain the dichloromethane market trend. The domestic dichloromethane market is expected to stabilize after rising, with attention to subsequent news developments.