The methylene dichloride (MDC) market in China displayed considerable price volatility during the week of May 9 and the week of May 16, owing to shifts in supply-demand and cost drivers. MDC prices initially declined by 3.5% in the week of May 9, followed by a notable rebound of 4.8% in the subsequent week.

The MDC market in China during the week of May 9 exhibited relatively weak supply-demand conditions. In addition to the weakening demand from the downstream sector, manufacturers were under pressure from excess inventories of MDC, so they had begun to reduce prices, though only marginally, to promote sales. The operational rate for methane chloride units in Shandong fell to around 75% due to supply slowdowns provoked by maintenance and manufacturer load cuts, which also negatively affected the supply of MDC for the market. Despite the reduction in supply due to reduced production, supply to the market was at least stable overall.

In terms of cost, the raw material methanol market experienced a sizable drop, in part due to wider macroeconomic sentiment and a downturn in demand. In the meantime, liquid chlorine prices in Shandong increased, although the impact on MDC costs was limited.  Subsequently, inventory increased post-holiday as logistics capacity dropped during the holiday, mounting pressure on the supply side.

The demand side indicated clear seasonal weakness. The refrigerant industry, a major user of MDC for R32 production, began its off-season, and demand was steady, although nothing notable. Additionally, other sectors such as pharmaceuticals, pesticides, and solvents continued to illustrate lackluster demand. While manufacturers offered ongoing discounts to entice purchases, transactions generally remained quiet throughout the market.

That said, the situation changed during the week of May 16. Methanol prices stabilized, some manufacturers even shifted to positive pricing ideas, liquid chlorine prices were set at higher, significant levels, solidifying costs for MDC more strongly. The demand side remained cautious, but did show a small uptick as downstream industries made essential purchases. Again, traders were still firmly in a wait-and-see situation; there were still things to sell at low prices, but the transaction volume remained limited.

Overall, the MDC markets in China exhibited marked price volatility in the month of May associated a weakness in raw material costs, turnarounds, and predictable seasonal demand cycles. The market is still set up for a phase of recovery as the month of June will represent the high point of demand for refrigerants, but the recovery scenario will likely be contingent on performance in the economy and downstream demand.