Introduction: In March, China's dichloromethane market experienced dramatic fluctuations, resembling a "roller coaster" ride. Prices surged sharply, then plummeted, followed by a period of range-bound consolidation and recovery, with a monthly volatility exceeding 90%, making it a focal point in the chemical market. The core drivers behind these significant price swings were the intertwined factors of intense raw material cost volatility due to international circumstances, export disruptions, and supply-demand mismatches. The market repeatedly wrestled between strong cost support and weak demand. As of March 31, the price of dichloromethane in Shandong region settled at 2,460 RMB/ton, up 43% month-on-month, but down 24% from the monthly peak.

I. Multiple Factors Underpin the Dramatic Rise and Fall of Dichloromethane

The domestic dichloromethane market in March can be clearly divided into three phases, showing a trend of sharp rise, steep fall, and then consolidation/recovery throughout the month.

In early March, influenced by the ongoing Middle East geopolitical tensions, raw material methanol prices continued to surge. Simultaneously, liquid chlorine prices in Shandong rose due to support from concentrated downstream production ramp-ups. Amid uncertainty over raw materials, methane chloride producers exhibited strong price support sentiment. Coupled with low industry inventory levels at the beginning of the period, the resonance of cost and supply factors led to a straight-line surge in dichloromethane prices.

However, as dichloromethane prices climbed to their yearly highs, downstream industries and traders had limited acceptance for high prices. Demand gradually cooled and returned to rationality. Additionally, some traders took profits, increasing the availability of lower-priced spot goods in the market. The industry fell into a dilemma of supply-demand imbalance. Multiple pressures coexisted, including cooling macro sentiment and high inventories at production plants. Concurrently, Middle East shipping disruptions led to a sharp decline in export orders. Under these multiple bearish factors, dichloromethane prices plummeted from their highs.

In late March, raw materials methanol and liquid chlorine strengthened again, repairing cost support and renewing producers' price support willingness. Downstream users engaged in essential restocking at lower prices, leading to a slight recovery in market trading. Prices rebounded moderately after hitting bottom.

II. The Triple Game of Cost, Supply-Demand, and Exports

1. Geopolitical Conflict Dominates; Cost Volatility Becomes the Norm

Methanol, as the core variable, was most affected by the Middle East situation. Iran accounts for 59% of China's methanol imports, and shipping disruptions directly triggered domestic supply anxiety, rapidly pushing up the cost line. Liquid chlorine experienced wide monthly fluctuations influenced by regional factors. The intense volatility on the cost side was the core trigger for the price surge and plunge in March.

2. Ample Supply; Demand Weakness and Divergence

On the supply side, the operating rate of the methane chloride industry remained high at around 80%. Although there were plant maintenance activities, overall supply was ample. Demand showed clear divergence: Refrigerant R32 had rigid demand support, but this was mostly for internal use within integrated enterprises, with limited external procurement. Demand from pharmaceuticals and electronics cleaning was stable but small in volume. Traditional solvent and cleaning applications faced demand contraction of 8%-15% due to environmental pressures and substitution by alternatives. Downstream sectors generally adopted a "purchase as needed, buy for immediate use" strategy, making it difficult for substantive demand to support high prices.

3. Export Front: Middle East Exports Disrupted, India May Offer a Turnaround

The Middle East situation in March caused delays and cancellations of dichloromethane export shipments. Originally exported goods flowed back into the domestic market, exacerbating oversupply and acting as a key driver for the mid-month price crash. Export disruptions also broke the original supply-demand balance, forcing the domestic market to absorb incremental supply.

However, from April 2 to June 30, India will reduce its import tariff on dichloromethane to 0%. The primary reason is supply chain tightness caused by the Middle East conflict. To ensure stable raw material supply for its downstream industries like pharmaceuticals, polyurethane, and coatings, India has temporarily suspended its anti-dumping duties on Chinese imports. In the short term, China's exports to India may see some increase, providing supportive factors.

III. Post-Extreme March Volatility, April Likely to See More Rational Trends, Easier to Rise Than Fall

After the extreme volatility in March, the dichloromethane market may return to more rational fluctuations in April. With the Middle East conflict unresolved, upstream raw material methanol remains subject to macro situation disturbances. There are expectations of reduced imports, keeping methanol prices elevated and providing a cost floor for methane chloride prices. Supply shows regionalized performance: operations in East China and Shandong are mostly stable, while plants in South China have maintenance and load reduction activities. However, overall operating rates remain high, and supply is regionally varied but generally ample. Downstream demand is steady for essential needs, with little expectation for a significant volume increase; market transactions will be primarily driven by rigid demand. Looking at April, dichloromethane prices are likely to oscillate repeatedly between strong cost support and weak supply-demand constraints, mainly moving within a range with cautious operations. Sharp surges or plunges are unlikely. Key variables to monitor continue to be the restoration of Middle East shipping, India's tariff suspension on Chinese goods, raw material price trends, and downstream purchasing patterns.