Market trends are shifting toward cost-driven dynamics; the dichloromethane market initially declined and then rebounded.

Overview: During this review week, the dichloromethane (DCM) market fell first and then rebounded, with the market's operating logic shifting from supply-demand-driven dynamics to cost-driven support. At the start of the week, the market moved broadly lower. End-use industries lacked substantive favorable support, and spot trading showed little follow-through. Inventory holders, focused on destocking, cut offers to move product. During this period, feedstock methanol surged sharply and liquid chlorine rebounded from the lows, squeezing chloromethane producers' margins and widening industry losses. Producers' willingness to hold prices firm strengthened notably. Driven by buy-on-strength sentiment, downstream purchasing enthusiasm recovered, and downstream buyers and traders took deliveries on a reasonably active basis. In the Shandong region, the average DCM price for the week fell by 134 yuan/ton to 2,171 yuan/ton, down 5.81%.

From last weekend into early this week, prices fell heavily. End-use segments lacked substantive positive drivers, downstream operating rates stayed at normal levels, consumption momentum was insufficient, and market sentiment was cautious, with participants largely purchasing for immediate needs and no concentrated restocking. Holders adjusted offers according to their own shipment volumes and inventory positions and, with a strong inclination to sell, proactively reduced prices. Toward the middle of the period, feedstock markets changed markedly: methanol surged across a broad front, and liquid chlorine rallied sharply from its lows. With both feedstocks rising in tandem, cost pressure on chloromethane producers increased and industry losses deepened further, prompting a shift in producers' attitude toward selling. This coincided with load reductions at certain plants, which lowered regional operating rates. Producers' price-defense resolve strengthened, and some companies controlled supply volumes to protect prices, laying the groundwork for the market to bottom out and rebound. As producers held prices firm and low-priced supply gradually disappeared, market sentiment quickly recovered. Downstream buyers and traders, guided by the buy-on-strength mentality, returned to the market after earlier waiting on the sidelines. Purchasing activity picked up markedly, with downstream need-based procurement combined with moderate trader restocking, generating decent market turnover and pushing DCM prices upward from the lows.

In terms of supply, although Jinling's Dongying plant remained shut down, Dongyue's 380,000-ton-per-year unit reduced its operating load, and Huichang Yonghe's 100,000-ton-per-year plant was idled, the units of Yonghao Hetai and Henan Jinhai came back on stream and ran at full capacity. Overall output and capacity utilization therefore trended upward. From a regional perspective, however, Shandong's capacity utilization fell notably as a result of the above shutdowns and load cut, with regional output declining and inventory pressure easing.

On the cost side, port methanol inventories fell during the period, and geopolitical developments strongly boosted sentiment; combined with continued expectations of tight supply, the methanol market rallied forcefully. Liquid chlorine likewise bottomed out and rebounded, supported by active downstream restocking. Both key feedstocks for chloromethanes rose together, keeping cost pressure elevated. In this period, the average weekly cost of chloromethanes was 2,161 yuan/ton, down 92 yuan/ton, or 4.08%, from the previous period. The average weekly profit was -266 yuan/ton, up 103 yuan/ton, or 27.91%, from the previous period.

Cost-profit comparison for China's chloromethane industry (unit: yuan/ton)

Overall trading activity in the market was episodic in nature. End-use demand performed poorly, restraining DCM price trends from the downstream side upward. Due to seasonal factors, industry demand softened, and producers kept operating rates low to control the base level of spot supply. During the export "window period," suppliers actively pushed volumes into the overseas market to ensure quota completion rates. Statistics show that the operating rate of the hydrofluorocarbon refrigerant R32 (HFC-32) industry rose 3 percentage points week on week to 45%. At present, balancing output against the limited demand space is a far better choice than running at high rates and building up inventory.

Looking ahead, in the next period some restarted units will return to stable operation, so output will likely be higher than in the current period, while producer inventory positions will be mixed. Following previous replenishment and constrained by high DCM prices, downstream buyers and traders are expected to show only moderate interest in taking deliveries next period, with demand-side support weakening. After DCM prices have climbed to elevated levels, downstream follow-through buying may be insufficient, market turnover could remain limited, and producer inventories may trend upward. That said, with feedstock prices still at high levels, the domestic DCM market is expected to mainly digest recent gains, with expectations of narrow fluctuations within a stable range. Further changes on the news front deserve close attention.