Introduction: In the first quarter of 2026, the domestic dichloromethane market experienced an unexpectedly strong rally, with prices surging rapidly from their low point at the beginning of the year. The magnitude of the increase during this period set a new record for recent years. Throughout the quarter, the core market driver shifted from traditional supply-demand fundamentals to being dominated by macro-geopolitical factors and costs, representing a clear case of "externally-driven" price increases. Entering the second quarter, as expectations surrounding geopolitical conflicts are gradually digested and raw material prices fluctuate at high levels, the market is expected to gradually return to being led by supply-demand fundamentals. The previously overheated rally may face adjustments, with the overall trend likely characterized by consolidation and a rational correction.

Key Q1 2026 Dichloromethane Data Summary (Unit: RMB/ton, 10k tons)

| Item | Q1 2026 | Q4 2025 | Q1 2025 | QoQ Change | YoY Change |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Price | 1,978 | 1,719 | 2,521 | +15.07% | -21.54% |
| Output | 47.64 | 47.07 | 40.67 | +1.21% | +17.14% |
| Capacity Utilization | 79.73% | 79.40% | 77.28% | +0.33 ppt | +2.45 ppt |
| Production Gross Margin | 87 | -74 | 1,053 | +217.57% | -91.74% |

Data Source: chempricehub

I. Dichloromethane Market: A First Quarter of Initial Weakness Followed by Strength

The domestic dichloromethane market in Q1 followed a pattern of low opening, high closing, trending from low-level consolidation to moderate recovery, and then to a broad upward shift. At the beginning of the year, impacted by the seasonal demand lull and the Spring Festival holiday, downstream industry operating rates were relatively low, and market trading was subdued. Prices remained weak, consolidating within the range of RMB 1,640-1,835/ton. Supply-demand fundamentals were the primary influence on the market, with periodic restocking purchases creating points of volatility.

The explosive rally truly emerged in March. Driven by escalating geopolitical conflicts in the Middle East, methanol prices surged rapidly. Coupled with a simultaneous rise in liquid chlorine prices, cost-side support for dichloromethane intensified sharply. Prices skyrocketed from around RMB 1,715/ton at the beginning of the month to RMB 3,250/ton, representing a near 90% increase within the period. After mid-month, high prices began to suppress downstream procurement, leading to a gradual accumulation of enterprise inventories. Combined with a cooling of macro influences, prices rapidly corrected to around RMB 1,895/ton. Towards the end of the month, prices rebounded again following a recovery in costs. By the end of the quarter, mainstream transaction prices in Shandong were in the range of RMB 2,450-2,470/ton, marking a 50% increase from the beginning of the year.

II. Regional Maintenance and Low Inventories Provided a Foundation for the Rise

Supply-side pressure in the domestic dichloromethane market during Q1 was largely manageable, providing a宽松 environment for price increases. Total dichloromethane output in Q1 was 476.4k tons, a quarter-on-quarter increase of 1.21%. Capacity utilization reached 79.73%, up 0.33 percentage points from Q4 2025. During the quarter, there were no new methane chloride facilities commissioned domestically, with capacity remaining steady at 4.25 million tons/year. Throughout the period, multiple units experienced varying degrees of load reduction or shutdowns due to planned maintenance, malfunctions, and cost factors, although the scale of maintenance was lower compared to Q4 2025. Overall operating rates saw a slight increase quarter-on-quarter.

III. Cost Resonance and Upward Pressure: Chloride Prices Rise Sharply to Pass on Costs

Dichloromethane production costs are highly dependent on methanol and liquid chlorine. In Q1, both key raw materials strengthened simultaneously, creating powerful cost resonance. For methanol, besides geopolitical conflicts leading to tighter imports and high prices, the situation was compounded. For liquid chlorine, the era of price subsidies is over, further raising the cost floor for dichloromethane.

The dual increase in raw material costs led to a significant upward shift in dichloromethane producers' costs, severely compressing production margins. Producers were forced to substantially raise their listed prices to pass on cost pressures, which became the direct driver of the price increase.

In Q1, the theoretical gross production margin for methane chlorides was RMB 87/ton, a quarter-on-quarter increase of 217.57%, but a year-on-year decrease of 91.74% compared to Q1 2025.

IV. Rigid Demand Provides a Floor, While High-Price Suppression Gradually Emerges

The demand side exhibited characteristics of "stable rigid demand coupled with caution towards chasing highs." Operations at the major downstream sector, fluorinated refrigerant R32, remained at high levels. Under quota control, rigid demand was stable, supporting basic dichloromethane consumption. Demand from industries like pharmaceutical intermediates and electronic cleaning was also relatively rigid, though overall volume was limited. Demand from traditional solvent industries remained weak, suppressed by environmental regulations and high prices.

Following the price surge, procurement willingness among downstream users and traders significantly declined,普遍 shifting to a "buy-as-needed, purchase for immediate use" approach. Market trading activity cooled, and enterprise inventories began accumulating from low levels. Demand-side support for prices gradually weakened, becoming a main reason for the mid-month price correction.

V. Q2 Outlook: Weakening Macro Drivers, Returning to Fundamental Adjustments

Entering the second quarter, the core logic of the dichloromethane market is set to shift. The macro premium from geopolitical conflicts will be gradually digested, and market focus will return from cost-driven factors to supply-demand fundamentals. The market trend is likely to transition from a "one-sided强势" to "consolidation and adjustment," overall presenting a pattern of "high-level volatility and rational correction."

In summary, the strong performance of the dichloromethane market in Q1 was the result of multiple factors resonating, including macro-geopolitical events, cost drivers, and low inventories, demonstrating clear periodicity and特殊性. In Q2, with macro drivers weakening and the market returning to supply-demand fundamentals, the interplay of bullish and bearish factors will likely lead to a phase of narrow-range volatility at high levels and a gradual rational correction, with the price center expected to shift lower compared to the Q1 peak.

Looking ahead, three key risk points require close attention: First, the evolution of geopolitical conflicts in the Middle East. Second, the operational status of domestic facilities and the release of new capacity; if supply remains宽松 and inventories accumulate, downward pressure on prices will increase. Third, downstream procurement intensity; following the暴涨暴跌 volatility of Q1, downstream users and traders have become more cautious, with reckless chasing of highs largely subsided.