Introduction: As a crucial chemical raw material, dichloromethane is widely used in refrigerants, pharmaceutical intermediates, industrial solvents, and other fields. Currently, the industry is caught in a dual squeeze of severe fluctuations on the cost side and sluggish demand growth, compounded by persistent overcapacity. This has significantly compressed corporate profit margins, substantially increased operational pressures, and shaped an overall landscape characterized by "high supply, weak demand, low profits, and strong divergence."

Recent domestic dichloromethane prices initially rose before declining. Raw material methanol prices remained stubbornly high, while another major feedstock, liquid chlorine, saw a sharp price increase, raising cost pressures for methyl chloride producers. Considering cost pressures and manageable inventory levels, producers continued to slightly raise their offered prices, leading to a volatile upward trend in dichloromethane prices in the first half of the week. However, as prices climbed to relatively high levels, downstream users and traders refrained from stockpiling, with transactions primarily consisting of small orders for immediate needs. Market trading sentiment remained subdued, lacking substantial support from the demand side. Inventory accumulation accelerated among regional producers, shifting the focus to destocking.

I. Cost Side: Frequent Raw Material Price Fluctuations Sharply Compress Profit Margins in the Chloride Industry

The primary feedstocks for dichloromethane production are liquid chlorine and methanol, whose volatile prices directly determine the industry's cost structure. Since late February 2026, escalating geopolitical conflicts in the Middle East and disruptions in Red Sea shipping have hindered China's methanol imports, driving prices up rapidly. By April 17, methanol prices in Shandong had increased by 850 yuan/ton compared to late February, a rise of 37%, while Ningbo methanol prices surged by 53%. Meanwhile, liquid chlorine prices in Shandong skyrocketed from negative values to 600 yuan/ton, an increase of over 600%.

Soaring raw material prices directly pushed up dichloromethane production costs, with the combined cost increase for methyl chloride exceeding 1,000 yuan. Although dichloromethane prices spiked in March, downstream sectors close to end-users had limited tolerance for high prices, resulting in delayed price transmission. Methyl chloride producers found themselves in a passive position, squeezed by both cost pressures and weak demand.

II. Demand Side: Weak Domestic and External Demand Sustains Subdued Market Trading

(I) Sluggish Domestic Demand with Traditional Sectors Continuing to Shrink

On the downstream side, major fluorocarbon refrigerant R32 producers maintained operating rates around 70%, supporting rigid demand and providing a stable baseline for dichloromethane consumption. However, other downstream sectors such as solvents and pharmaceutical intermediates were significantly constrained by high prices, with some small-scale enterprises forced to halt production. Overall market trading performance remained weak.

(II) Weakening External Demand Support with Slowing Export Growth

Exports surged by 44.4% year-on-year in 2025, primarily driven by the passive absorption of domestic surplus capacity. In 2026, factors such as Middle East shipping disruptions, rising freight costs, and international capacity competition are expected to slow export growth to 5%-8%, insufficient to offset domestic demand weakness. Moreover, domestic dichloromethane prices rose sharply due to Middle East conflicts. Although prices corrected in April, they remained relatively high, further inhibiting export volumes.

III. Supply Side: Intensifying Overcapacity and Escalating Industry Competition

Since 2024, China's dichloromethane sector has entered another rapid expansion phase. Total production reached 1.7477 million tons in 2025, a year-on-year increase of 17.50%, and is projected to exceed 2 million tons in 2026. Industry operating rates have remained high at 70%-80%. Even during loss-making periods, producers have been reluctant to significantly reduce output due to fixed cost pressures, resulting in limited supply elasticity. Overcapacity has led to fierce market competition, with prices falling 16% for the full year 2025. Multiple attempted price rebounds during the year were reversed due to worsening supply-demand imbalances. Recently, new capacities from Henan Jinhai and Chongqing Jialihe have come online and will be included in China's methyl chloride capacity once operations stabilize.

IV. Outlook: Short-Term Pressure on the Dichloromethane Market

In the short term, facing inventory and sales pressures, dichloromethane prices are expected to trend downward compared to this week. Key factors to monitor include:

1. Supply Side: Production is expected to increase, with rising producer inventories indicating a generally loose supply situation.
2. Demand Side: As dichloromethane prices have risen to relatively high levels, purchasing enthusiasm from downstream users and traders has waned. Demand remains lackluster, and the downstream acceptance level following potential price declines warrants attention.
3. Raw Materials: Methanol prices are fluctuating at high levels, while liquid chlorine prices are declining, alleviating some cost pressure for methyl chloride producers.
4. Exports: Higher domestic prices have eroded competitiveness, coupled with slowing overseas rigid demand and restricted trade flows in some regions. Recent export order volumes have declined year-on-year, reducing the absorption of domestic supply.

Overall, the supply-demand fundamentals for dichloromethane appear weak in the coming period. Sellers are likely to prioritize destocking, suggesting potential downward pressure on domestic dichloromethane prices in the near term. However, with the May Day holiday approaching, attention should be paid to potential restocking activities by downstream users and traders if prices decline.