In the second half of October, the dichloromethane market showed a V-shaped curve of “sharp decline in mid month → rebound in late month”. As of October 28th, the mixed price of dichloromethane in Shandong region was 3145 yuan/ton, an increase of 4.14% during the period.
Analysis of Core Driving Factors
Cost side: Cost support shifts from weak to strong
In the middle of the month, methanol prices plummeted rapidly, and the cost side’s support for high prices was the first to disintegrate; At the same time, after the price reached a high level, there was a clear lack of downstream acceptance, and traders’ willingness to ship at high prices increased, causing market sentiment to quickly turn bearish. In the latter half of the year, liquid chlorine violently rose, and the market quickly turned upwards. The local contraction on the supply side resonated with the strong driving force on the cost side, and the price of dichloromethane quickly rebounded.
Supply side: Shortage of spot resources and low inventory support
Mainly parked or continuously operating at low load. The overall inventory of the factory is low and there is no obvious pressure to accumulate inventory, which is also the core confidence for a rapid rebound after a sharp decline; But with the recovery of profits, there is an expectation of a rebound in the operation of some facilities, and the supply elasticity is gradually increasing, marginally easing the pattern of sustained tight supply.
On the demand side: there is a bottom line for essential needs and insufficient elasticity
Downstream R32 refrigerant is subject to quota constraints in the fourth quarter and the off-season demand for terminal refrigeration, resulting in a moderate level of operation and limited incremental growth; The orders for coatings, adhesives, and pharmaceutical solvents are flat, only for immediate use and procurement, and we refuse to stock up at high prices; Export orders are generally low, and overseas acceptance of high priced sources is not high, making it difficult to form incremental hedging against domestic pressure.
Future forecast
In the short term, the cost support for dichloromethane is still relatively strong, and the benefits of low factory inventory and reduced maintenance of some facilities are still present. The market has a certain resistance to decline, and the price is likely to maintain a strong oscillation pattern, but the momentum for further significant increases is limited.
The sustained high price of liquid chlorine is the most critical variable in this round of market trend. If liquid chlorine continues to strengthen, it will further push up the cost center and drive up the quotation; Once the rise of liquid chlorine slows down and rebounds, the cost side support weakens, and there is an expectation of a negative increase in the cumulative device, the supply increment will gradually be released, which will suppress the upward space of prices. The lack of sustained demand makes it difficult to support prices to break out of the trend and rise sharply.
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