Cost-Supply-Demand Interplay Drives Volatile Dichloromethane Market

Lead-in: This week, the Chinese dichloromethane (DCM) market fluctuated at high levels before pulling back. Market dynamics were driven by the interplay between cost factors and supply-demand fundamentals. At the start of the week, DCM prices remained elevated, with holders adjusting their offers flexibly based on inventory levels and sales performance. Lacking substantive support from end-users, downstream consumers and traders purchased only according to rigid demand, resulting in weak trading momentum. However, raw materials methanol and liquid chlorine continued to trade at high levels, causing severe losses for methane chlorination enterprises and reducing their willingness to further cut prices. Amidst this tug-of-war between bullish and bearish factors, the domestic DCM market primarily stabilized after a decline. This week, the average weekly price of DCM in Shandong was 2,374 CNY/ton, an increase of 167 CNY/ton or 7.57% compared to the previous week.

This week, methane chlorination production stood at 65,000 tons, down 8.45% from last week; capacity utilization was 72.62%, a decrease of 6.61 percentage points from the previous period. During the cycle, Dongyue’s 380,000 tons/year unit increased its load to 60%, while Guangxi Jinyi’s 370,000 tons/year unit reduced its load to 30%, and Hengyang Jindong’s 200,000 tons/year unit reduced its load to 40%. Other units showed no significant changes. Overall, production losses exceeded recoveries, leading to a downward trend in both output and capacity utilization. Looking ahead to next week, methane chlorination enterprises face significant cost pressure, and some units that previously reduced loads or shut down are expected to maintain these states. Therefore, capacity utilization and production volumes are projected to continue declining.

From a cost perspective, low vessel arrivals combined with decent pickup volumes from mainstream storage areas supported port methanol inventories, which dropped significantly as expected. With limited circulating quantities in coastal markets, prices continued to oscillate upward during the cycle. Raw material liquid chlorine also rebounded from bottom levels, driven by active restocking from downstream users. The simultaneous rise in both major raw materials for methane chlorination kept cost pressures high. This week, the average weekly cost for methane chlorination was 2,576 CNY/ton, up 241 CNY/ton or 10.32% from the previous week's average. The average weekly profit for methane chlorination was -476 CNY/ton, a drop of 131 CNY/ton or 37.97% from the previous week's average profit.

Data Source: Chempricehub Information

The overall market trading atmosphere exhibited phased characteristics. End-user operating rates changed little from previous periods, constraining DCM market trends from the bottom up. The mainstream offer for refrigerant R32 in East China referenced 63,500–64,500 CNY/ton. As of press time, seasonal effects have led to softer industry demand. Original Equipment Manufacturers (OEMs) are shipping according to orders, slowing production pace to control spot inventory bases. Within the foreign trade "window," suppliers are actively exporting to ensure quota completion rates. Statistics show that the operating rate of the R32 refrigerant industry remains stable at 44% (flat compared to the previous week). Currently, balancing limited demand space is preferred over high production leading to inventory accumulation. However, approaching the upcoming holidays, some downstream users and traders moderately replenished stocks at the end of this week, slightly improving market trading activity.

Data Source: Chempricehub Information

In summary, there are no planned unit startups or shutdowns for next week, and production will be lower than this week. Enterprise inventories remain generally low, with many companies preferring to maintain low stock levels through the holidays. On the demand side, although some downstream users and traders intend to replenish stocks, current DCM prices remain relatively high, so overall procurement volumes have not met expectations, providing only moderate support to the DCM market. Regarding costs, methanol provides high-level support, while liquid chlorine may see a downturn, keeping production enterprises under significant cost pressure. Overall, at the juncture of the upcoming holidays, supply-demand fundamentals and cost factors are engaging in a tug-of-war. Short-term DCM prices are likely to stabilize temporarily, with the overall market expected to adjust within a narrow range. Future attention should focus on tracking demand performance.