SunSirs: Supported by Cost Floors, Constrained by Demand: Dichloromethane Underwent Volatile Consolidation

Market Trends

According to SunSirs data: During the first half of April, the domestic dichloromethane market was characterized by cost-driven price increases, demand-side support acting as a floor, and a rapid retreat following an initial surge. As of April 17, the blended spot price for bulk dichloromethane in the Shandong region stood at 2,457 RMB/ton, marking a 6.2% decline compared to the beginning of the month.

Fundamental Analysis

Cost Side: The rise in raw material prices has far outpaced that of finished products, resulting in a severe squeeze on industry profit margins.

During the first half of the month, methanol prices surged by as much as 18%, whereas dichloromethane prices rose by a maximum of only 7.33% over the same period; this severe disconnect in cost transmission rapidly eroded manufacturers' profit margins. Concurrently, liquid chlorine prices also rose sharply, further driving up production costs for enterprises; however, end-market demand proved unable to absorb this cost pressure, leaving companies trapped in a dilemma: unable to sell their products if they raise prices, yet facing financial losses if they lower them.

Supply and Demand: Weak demand is the primary driver behind the current round of price declines.

Insufficient Downstream Demand: Orders across downstream sectors—including refrigerants, pharmaceuticals, and solvents—have shown no significant signs of improvement. Purchasing appetite remains persistently sluggish in the face of high prices; consequently, a "buy-as-needed" procurement strategy has become the prevailing norm, rendering it impossible to sustain prices at continuously elevated levels.

Inventory Pressure Forces Sell-Off: The price increases—initially bolstered by low inventory levels—failed to stimulate a surge in demand after prices peaked. As inventory levels passively accumulated, companies accelerated their sell-offs by cutting prices, directly triggering a rapid decline in market rates.

Export Disruptions: Shipping issues in the Middle East continue to impact export orders; with external demand failing to provide adequate replenishment, the imbalance between supply and demand in the domestic market has further intensified.

Market outlook

Given the market's characteristic surge followed by a retreat during the first half of April—coupled with a fundamental landscape defined by strong cost-side support and a weak recovery in demand—the domestic dichloromethane market is expected to undergo a phase of high-level consolidation and fluctuation in the short term. With the risk of a price correction coexisting alongside cost-driven support, the overall market is projected to settle into a state of "weak equilibrium," characterized by an inability to rise further yet a resistance to falling significantly.

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