Market Overview:
As of November 28th, according to monitoring data from Shengyi Society, the average market price of dichloromethane in Shandong region was 1695 yuan/ton, with a price drop of 5.7% this month. Compared with the same period last year, prices have dropped significantly by 41.35%, and the overall market is showing a weak pattern.
The market trend this month has been fluctuating: in the first half of the month, driven by the contraction of the supply side, the market successfully stopped falling and rebounded, with prices rising by 6.26% at one point. However, due to the sustained weakness in terminal demand, there is limited room for price increases. Entering the middle and late stages, as supply pressure rebounds and cost support significantly weakens, the market returns to a downward channel, and the price center of gravity continues to shift downward.
Supply side: Fluctuations in operating rates dominate prices, inventory pressure triggers competition
Supply contraction drives rebound: At the beginning of the month, multiple mainstream production facilities frequently shut down or reduced load operations, causing the overall operating rate of the industry to drop to a low of around 65%. The significant reduction in supply has lowered enterprise inventory to a low level, providing a solid price support foundation for the market and successfully driving price rebound.
Supply recovery suppresses the market: With the operating rate gradually recovering to around 78%, the supply of goods in the market has significantly increased. As a result, the inventory pressure of enterprises continues to accumulate. In order to seize limited orders and alleviate inventory pressure, manufacturers have adopted price reduction and promotion strategies, leading to intensified market price competition and becoming the main driving force for price drops in the middle and late months.
On the demand side: both internal and external demand are weak, restricting the market’s height
Low domestic demand performance: Downstream industries such as refrigerants, pharmaceuticals, and pesticides have shown lackluster performance, with procurement mainly focused on rigid demand and small orders, lacking the intention of large-scale stocking. Downstream industries generally hold high inventory levels, with limited ability and willingness to receive goods. Although the reduction in supply has temporarily pushed up prices, the lack of support from actual demand and volume has resulted in a weak foundation for price increases.
Stable external demand but limited impact: In October, China’s dichloromethane exports were 18850.28 tons, with a slight increase of 0.11% month on month, showing stable performance. However, compared to the huge domestic supply volume, the export scale is difficult to effectively digest the surge in production and cannot reverse the negative situation caused by weak domestic demand.
Cost side: collapse of raw material support, weakening the price bottom line
The methanol market is under pressure and declining: As the main raw material, the methanol market is facing continuous pressure from high port inventory, high supply, and weak demand, resulting in overall price pressure. Despite short-term fluctuations caused by factors such as limited gas expectations and coal price support in the latter half of the year, the fundamental weakness has not changed. This month, the benchmark price of methanol in Shengyi Society fell by 2.4% to 2103.33 yuan/ton. The continuous decline in raw material costs has weakened the bottom line of dichloromethane prices from below.
Weak support for the liquid chlorine market: The liquid chlorine market in Shandong has fluctuated this month, with frequent price fluctuations and overall weakness, making it difficult to form effective and sustained cost support for dichloromethane.
Future outlook:
Overall, negative factors dominate the current dichloromethane market:
Supply pressure still exists: the industry operating rate has recovered to a relatively high level, and if the current load is maintained, the market supply of goods will remain abundant.
Difficult to see improvement in demand: Downstream industries generally perform flat, and the possibility of a significant rebound in demand in the short term is low, which will continue to constrain the upward trend of the market.
Weak cost support: The fundamentals of the main raw material methanol market are weak, and it is expected that it will be difficult to form a strong cost push in the short term.
Therefore, it is expected that the dichloromethane market will continue to face downward pressure in the short term, with weak operations being the main focus. Subsequently, it is necessary to closely monitor the changes in upstream raw material prices, the dynamic equipment of major factories, and the adjustment of operating loads. Any significant change in either party may become a key variable to break the current deadlock.
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