Supply-Demand and Cost Factors Drive Dichloromethane Market in Both Directions: Prices First Fell, Then Rose

This week, the dichloromethane market first declined and then rebounded, showing a phased movement. At the beginning of the week, the industry operating rate remained at around 80%, with ample supply. Some enterprises held medium-to-high inventory levels. Under bearish sentiment among downstream users and traders, transactions were mainly driven by essential demand, with cautious market participation. Holders prioritized shipments and continued to cut prices to sell. However, as feedstock liquid chlorine and methanol both rose, some enterprises began to reduce operating loads due to cost pressure. The industry operating rate fell to around 70%, and enterprises showed a strong willingness to halt price declines. After prices fell to low levels, downstream users and traders replenished stocks at low prices, easing the pressure on enterprise shipments and inventories. With a bullish outlook, they limited sales and held back inventory, causing the market benchmark to rebound rapidly.

At the beginning of the week, plant operations across the industry were generally stable, with the operating rate maintained at around 80%. Market supply was ample, and some producers saw inventories climb to medium-high levels, with increasing shipping pressure. Downstream end-users and traders still held bearish expectations for the market. Transactions were dominated by essential demand, with cautious purchasing attitudes and small, order-based procurement. Dragged by inventory pressure and destocking, enterprises continued to lower offers to drive shipments, shifting the market benchmark downward. However, during the week, upstream feedstock liquid chlorine and methanol rose in tandem, significantly lifting production costs. Forced by cost pressure, some producers began to operate at reduced loads, bringing the overall industry operating rate down to around 70%. Supply contracted to some extent, and producers' willingness to stop price declines and support prices increased markedly.

Strong cost support was the core factor underpinning the market's firmness and rebound from the bottom this week. During this period, feedstock methanol and liquid chlorine rallied strongly, providing solid cost support for methane chlorides. The average weekly cost of methane chlorides in this period was 2,261 yuan/tonne, up 285 yuan/tonne (14.42%) from the previous period's average. Cost pressure in the industry climbed significantly, and enterprises suffered severe theoretical losses. The average weekly profit for methane chlorides was -672 yuan/tonne, down 341 yuan/tonne (103.02%) from the previous period's average. Against the backdrop of linked increases in raw material prices and severe losses for methane chloride producers, there was a widespread willingness among producers to support and stabilize prices.

Supply continued to contract, and with downstream users and traders replenishing stocks at low prices, enterprises in the region saw inventory pressure ease, further consolidating the market fundamentals. In this period, methane chloride output was 68,700 tonnes, down 4.85% from last week; capacity utilization was 76.74%, down 3.88 percentage points from the previous period. Among this, weekly dichloromethane output was 41,200 tonnes, down 2,100 tonnes from last week.

Domestic Methane Chloride Supply-Demand Balance Sheet (Unit: 10,000 tonnes)

Data source: Chempricehub Information

After prices fell to a low range, downstream plants and traders were prompted to enter the market and replenish stocks at low prices. Market transaction sentiment improved markedly, enterprises accelerated shipments, and inventory pressure was effectively relieved. As bullish sentiment heated up quickly, some producers controlled volumes and held back sales, tightening spot availability and driving the market benchmark to rebound rapidly. The main downstream refrigerant R32 industry maintained an operating load at nearly 50%. In August, end-user plants successively adjusted their rest schedules, and terminal production schedules continued to decline, with domestic sales production schedules contracting further.

In summary, after destocking in this period, some enterprises' inventories fell to medium-low levels, with social inventories shifting. However, after low-price restocking, downstream users and traders may become less enthusiastic about receiving goods in the next period, so demand-side support may weaken. Subsequently, producers will face little inventory pressure. Combined with severe losses in methane chlorides, enterprises will continue to primarily raise dichloromethane prices. However, end-use demand is substantially limited, with consumption mainly drawing from earlier inventories. Therefore, in the next period, the domestic dichloromethane market is expected to show a trend of first rising and then stabilizing. Attention should be paid to the impact of high costs on production units.