SunSirs: Dichloromethane Market Review for 2025 and Outlook for 2026

In 2025, the dichloromethane market was deeply mired in a triple dilemma of "high supply, weak demand, and low profits," with prices experiencing a historic decline and industry adjustment pressures accumulating comprehensively. 2026, as a crucial year for the transformation of the supply and demand landscape, will see the market continue its weak trend. However, under the combined effects of optimized supply structure, intensified demand differentiation, and reshaped cost transmission, the market will exhibit new characteristics of "weakness with variations and increased differentiation," making a trend reversal unlikely.

2025 Market Review: The Core Logic Behind the Deep Market Bottom

2025 was a year of concentrated conflict in the dichloromethane industry, with the market following a core trajectory of "unilateral decline and weak, unsustainable rebounds," laying the foundation for a market in 2026 characterized by "supply-demand imbalance and ineffective cost support."

1. Price trend: Historic breakdown, weak rebound

Record-breaking price plunge: Market prices in the Shandong region continued to decline from their peak at the beginning of the year, falling below the critical 2,000 RMB/ton mark in the fourth quarter and reaching a historical low of 1,662.5 RMB/ton. The annual decline exceeded 41%, and prices remained at a low level at the end of the year.

The overall weak trend was difficult to reverse: the average price for the year was approximately 2,140 RMB/ton, a significant decrease of 16% compared to 2024. Multiple temporary rebounds throughout the year quickly reversed due to unresolved supply-demand imbalances, exhibiting a typical pattern of "gradual decline followed by weak rebounds."

2. Core Drivers: Supply-demand imbalance was the dominant factor, while cost advantages were no longer effective.

Supply side: High operating rates and new capacity additions were leading to continued ample supply. Industry operating rates remained in the high range of 65%-86%, with new capacity coming online at Hengyang in Hunan, Yonghao and Tai in Shandong, and the expansion of Yonghe in Huichang, further increasing output. At the same time, due to environmental regulations and the need for stable plant operation, companies had limited room for voluntary production cuts, resulting in insufficient supply elasticity and continued market pressure.

Demand side: Structural differentiation, overall weakness. Refrigerant R32, as the largest downstream application (accounting for approximately 41%), saw its demand increase by 5.11% year-on-year to 505,000 tons, becoming the only source of strong support. However, since its procurement is mainly for internal use, it cannot generate external demand. Demand in traditional sectors such as pharmaceuticals, solvents, and metal cleaning decreased by 8%-15% year-on-year, coupled with pressure from substitutes such as dichloroethane, resulting in weak overall domestic demand. Although exports increased significantly by 44.4% year-on-year, mainly to emerging markets such as Turkey and Vietnam, this was essentially a passive absorption of domestic excess capacity, rather than active demand growth.

Cost side: Favorable factors were overshadowed, and the transmission mechanism failed. The average annual price of methanol, the raw material, was 2,403.12 RMB/ton (a year-on-year decrease of 6.24%), and the price of liquid chlorine continued to weaken, even falling into negative territory. This provided a cost buffer for dichloromethane, but the severe supply-demand imbalance completely offset this positive factor. The decrease in costs did not translate into profits, only highlighting the dominant role of the supply-demand contradiction.

Market Outlook for 2026: The market is expected to be mainly characterized by weak fluctuations, with structural opportunities becoming more prominent

In 2026, the dichloromethane industry will continue the adjustment trends of 2025, but new variables will emerge due to structural optimization on the supply side, export pressure on the demand side, and increasing differentiation in costs. The overall market will be characterized by "marginal improvement in supply, increasing differentiation in demand, hindered cost transmission, and weak price fluctuations."

1. Supply side: Slower production expansion + capacity reduction, resulting in a marginal weakening of downward pressure.

In 2026, the supply side will continue to be based on the high production capacity of 2025, but the combination of "slower capacity expansion and the elimination of outdated capacity" will alleviate some of the pressure and become the core driving force for marginal improvement in market conditions.

Limited new capacity: Following the increase in total methane chloride production capacity to 4.12 million tons per year in 2025, the industry's expansion momentum will significantly weaken in 2026.  Several planned projects have been delayed, with only a few projects, such as those by Gansu Juhua, likely to proceed. The impact of new capacity on the market will be significantly reduced.

Outdated production capacity is being phased out at an accelerated pace: at the policy level, old equipment that has been in operation for over 20 years faces pressure for green transformation or elimination; at the market level, low prices and losses in 2025 will challenge the survival of high-cost enterprises, and small and medium-sized facilities lacking supporting industrial chains and advanced technology will be forced to exit the market, leading to industry consolidation towards integration and high-end production.

High operating rates continue to exert downward pressure: Despite ongoing capacity rationalization, without large-scale, long-term shutdowns or capacity exits, the industry's high operating rates will persist, remaining a core factor suppressing prices. Supply pressure will only be temporarily relieved during periods of voluntary production cuts by companies or concentrated plant maintenance.

2. Demand side: Rigid support from domestic demand combined with pressure from declining exports means overall growth will be difficult to achieve.

In 2026, the demand side will continue the differentiated pattern of 2025, with rigid demand for R32 providing a floor, but the contraction in traditional sectors and the slowdown in export growth will constrain overall growth. Demand will remain "supported but without significant highlights."

Stable and steadily increasing demand: The production quota for refrigerant R32 in 2026 is approximately 282,000 tons, corresponding to a dichloromethane consumption of about 507,000 tons, a slight increase of 0.4% year-on-year. It continues to act as a market stabilizer, but the internal procurement model still struggles to drive external market demand.

Traditional demand is shrinking at an accelerated pace: foaming agents will be completely banned on January 1, 2026, aerosol propellants and some mold release agents are subject to policy restrictions, and traditional solvent markets are continuously losing market share to low-toxicity and environmentally friendly alternatives, resulting in a permanent reduction in demand; demand in the pharmaceutical and metal cleaning sectors will also remain weak.

Export growth is slowing, and policy risks are emerging: Exports remain a key channel for absorbing excess capacity, but growth in 2026 is expected to slow significantly compared to 44.4% in 2025; at the same time, dichloromethane has been added to the export control list of chemicals used in drug manufacturing, and countries such as the United States, Mexico, and Canada have been added to the list of specific controlled regions. Increased export compliance costs may constrain export growth in some markets, requiring a continued shift of market focus towards emerging markets such as Türkiye and Vietnam.

Limited incremental demand from emerging sectors: Although there is growth in demand from emerging fields such as battery wet-process separators and fine chemicals, these sectors account for a small proportion of total consumption and cannot offset the decline in traditional sectors, resulting in a weak overall impact on market trends.

3. Cost side: Differentiation is intensifying, and integrated companies are showing a clear advantage.

In 2026, the cost side will continue the differentiated trend observed in 2025. Methanol price fluctuations will provide temporary support, and the integrated advantages in the liquid chlorine segment will be further amplified. However, the efficiency of cost transmission will still be constrained by the supply and demand dynamics.

Methanol: Phased Cost Support: The central price range for methanol is projected to be 2,100-2,300 RMB/ton in 2026, with price fluctuations closely mirroring the dichloromethane index over the long term, indicating a significant cost pass-through effect. However, against a backdrop of oversupply, the increase in methanol prices is unlikely to be fully passed on to the final price of dichloromethane, only forming a temporary cost floor at low levels.

Liquid Chlorine: Integrated Enterprises Continue to Benefit: The overcapacity and weak demand in the liquid chlorine industry are expected to persist, and prices are likely to remain low. Integrated enterprises with supporting chlor-alkali facilities will continue to enjoy cost advantages and maintain stable operations even during periods of industry losses; however, companies that rely on external sources of liquid chlorine will face increased cost pressure, and their profit margins will be further squeezed.

4. Price trend forecast: Weak and volatile, fluctuating within a range.

Considering supply and demand, costs, and policy factors, the dichloromethane market in 2026 will continue the weak trend of 2025, with the price center likely to shift slightly lower than in 2025, showing a pattern of "low-level fluctuations with limited upward potential."

Price Range: The price is expected to fluctuate between 1,700 and 2,300 RMB/ton throughout the year, with the low point approaching the historical low of 2025, and the high point unlikely to exceed 2,500 RMB/ton due to supply-demand imbalances.

Price Fluctuations: During periods of concentrated equipment maintenance and temporary surges in exports, prices may experience a 2%-5% rebound; however, during traditional off-seasons when production capacity is fully utilized and demand is weak, prices will revert to a weak, downward trend.

Summary and Outlook

The significant market downturn in 2025 has created substantial pressure for adjustment in the dichloromethane industry. 2026 will be a critical year of transformation, as the industry enters a new phase of accelerated capacity reduction and deepened structural optimization, but the core imbalance between supply and demand will remain largely unresolved.

The core conclusion for the market outlook throughout the year is: weak and volatile conditions will prevail, with structural opportunities replacing overall growth. Significant price increases are unlikely, with only temporary recovery opportunities expected; at the corporate competition level, leading companies with integrated chlor-alkali production, technological advantages, and established export channels will continue to gain market share, while smaller, high-cost producers will exit the market at an accelerated pace, leading to further industry consolidation.

For market participants, manufacturers need to control inventory and focus on high-end products; traders need to seize opportunities during temporary market rebounds, buying and selling quickly; and downstream companies can purchase as needed and look for opportunities to substitute with alternative products. In the long term, the industry needs to wait for signals of large-scale supply-side contraction or unexpectedly strong export growth before it can truly emerge from the bottom and enter a new equilibrium cycle.

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