SunSirs: Dichloromethane Prices Plummeted After the Holiday but Quickly Recovered

Market Overview: Flash Drop and Recovery

After the Spring Festival, the Shandong dichloromethane market experienced a sharp price drop, with a single-day decline of up to 7.11%. Subsequently, it quickly stabilized and rebounded in the latter part of the week, completing a rapid price reduction, inventory clearance, and price recovery.

According to the commodity market analysis system of SunSirs, as of February 27, the mixed price of bulk dichloromethane in Shandong was 1,720 RMB/ton, a decrease of 3.77% compared with before the Spring Festival.

Supply side: High inventory levels were one of the core factors contributing to the sharp market decline after the Spring Festival.

During the Spring Festival, businesses maintained normal production, but logistics were disrupted, leading to a continuous accumulation of inventory. After production resumed following the holiday, this inventory pressure was released in a concentrated manner, with most manufacturers choosing to proactively lower prices to clear inventory, directly causing a single-day price drop exceeding 7%. As low-priced goods quickly absorbed the inventory, inventory pressure eased, and businesses' willingness to maintain prices increased, with quotations gradually and tentatively rising. Some major plants in Shandong resumed operations, and the industry's operating rate rebounded to around 80%.

Demand side: Three factors converged, the concentrated release of buying demand.

Post-holiday restocking: Downstream factories and traders gradually resumed work and production after the Spring Festival, resulting in rigid restocking demand.

Bottom-fishing mentality: After prices plummeted to their lowest levels this year, the willingness of intermediaries and some downstream users to stock up was greatly stimulated, and market trading volume increased significantly, forming an effective support force.

Export support: The stable execution of overseas orders also provided an important channel for absorbing surplus domestic production, accelerating the destocking process.

On the cost side: Weakening bottom support allowed room for price increases.

Liquid chlorine: In Shandong's liquid chlorine market, inventory levels remained high in some areas, and downstream operations have not fully recovered. The liquid chlorine market was trending downwards, with ex-factory prices for tank trucks falling below 1 RMB/ton. The collapse in liquid chlorine prices had directly weakened the cost support floor for methane chloride producers, providing them with room to lower prices and offer concessions.

Methanol: Market sentiment was weak, with high supply pressure coupled with cautious downstream purchasing, putting short-term pressure on the market. On February 27, the benchmark price of methanol on the business information platform was 2,185.83 RMB/ton, a decrease of 0.7% compared to before the Spring Festival, with a relatively limited impact on the cost of dichloromethane.

Market outlook

The market was in a phase of flux, characterized by low inventory, recovering demand, and weak costs. With downstream industries fully resuming operations after the Lantern Festival, demand is expected to continue its steady release. The Shandong dichloromethane market is projected to maintain a slightly bullish oscillation in the short term. However, lacking strong cost support, the extent of any subsequent rebound will depend heavily on downstream demand for the increased prices and inventory changes at major manufacturers.

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