Market Overview: (December 9-16)
Driven by rising costs and a temporary supply contraction, the domestic dichloromethane market experienced a "pulsed" rebound. According to data monitored by SunSirs' commodity market analysis system, as of December 16th, the average price of bulk dichloromethane in Shandong province was 1,790 RMB/ton, a 6.23% increase within the week. However, the significant year-on-year decline of 38.8% revealed that the fundamental imbalance between supply and demand in the market remained unchanged.
Initially, rainy and snowy weather led to seasonal increases in logistics costs, coupled with voluntary production cuts at some facilities in the Shandong region, creating a short-term positive situation driven by "cost push + supply reduction." This stimulated stocking-up sentiment among some downstream businesses and traders, alleviating inventory pressure on companies and strengthening their willingness to maintain prices. However, as prices rose, the motivation for downstream businesses to continue purchasing weakened, resulting in a severe lack of sustainable consumer demand.
Supply side: Short-term disruptions were unlikely to alter the overall trend of ample supply
During this period, the reduction in operating rates of facilities in the region was a key variable supporting prices. This eased inventory pressure on companies and sent a market signal of "tight supply." However, this support was extremely fragile. According to market information, the facilities that had reduced production began to slowly resume operations, and expectations of increased supply were strengthening. In the medium to long term, domestic dichloromethane production capacity is abundant, and maintaining a relatively high industry operating rate is the norm. Once the temporary production cuts end, the market will once again face supply pressure.
Demand side: Weak demand limited the extent of the rebound
The support from key demand sectors was unstable: The refrigerant industry, the largest downstream sector, consisted mostly of leading companies that had integrated upstream raw material production facilities, limiting their reliance on externally purchased dichloromethane.
Other sectors were generally sluggish: in high-end fields such as pharmaceuticals and electronics, demand was stable but the total volume was limited; while in other traditional application areas, demand was squeezed by both insufficient macroeconomic activity and the shift towards environmentally friendly alternatives. Both downstream factories and traders were generally adopting a strategy of "purchasing on demand and replenishing stocks in small quantities when prices are low," resulting in a lack of speculative and stockpiling demand in the market, which prevented sustained price increases.
Cost side: Rising raw material prices provided strong support
Liquid chlorine: The price fluctuated within its cycle, initially falling and then rising, and was temporarily at a relatively high level, exerting direct and significant pressure on the production cost of chlorinated methane.
Methanol: Market sentiment improved, and prices stabilized and rebounded. Sellers' reluctance to sell and buyers' opportunistic purchases at lower prices jointly drove a slight upward trend in prices. As of December 15th, the SunSirs' benchmark price for methanol was 2,102.5 RMB/ton, representing a 1.08% increase during the period.
High costs had severely squeezed the profit margins of manufacturing companies, putting immense pressure on them when they tried to lower prices to reduce inventory. This limited the potential for significant price drops in the market, creating a "rigid floor" for prices. However, it's important to note that during periods of weak demand, cost support can only prevent prices from plummeting, but it cannot independently drive sustained price increases.
Market Outlook: The market is consolidating weakly, awaiting new variables
In the short term, as production facilities resume operation, the temporary support from the supply side to the market will fade. Meanwhile, there are no signs of improvement on the demand side, and the market lacks new upward drivers. Prices are expected to experience a slight correction from their rebound highs and find a new equilibrium point near the cost line, resulting in a narrow range of fluctuations with a slight downward shift in the overall trend.
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