Exports blocked, dichloromethane "exposed"
Dichloromethane market performance in 2015
In 2015, the global economy suffered a weak downturn, and the profitability of the domestic real economy also fell sharply. Coupled with the implementation of the strictest environmental protection laws in China, the dichloromethane market fell by 38%, exceeding the average decline of crude oil by 33%. Compared with the average decline of 47% in crude oil and only 9% in dichloromethane in 2014, there is a "world of difference". Throughout the year, the traditional downstream of dichloromethane was under pressure, and the overall demand fell by nearly one-third, particularly in southern China. In late October, the gross profit of the factory fell to negative values.
The problem of overcapacity
Judging from the demand situation of dichloromethane, the hot market in 2014 benefited from the "prosperity" of the refrigerant industry, and the weak performance in 2015 can be said to be "exposed". Since the introduction of the first set of 30,000 tons/year methanol processing plant in Zhejiang Quhua in the 1990s, the production capacity of chloromethane has grown abnormally rapidly, while downstream demand has not risen sharply at the same time. The entire industry has fallen into the quagmire of overcapacity in the past few years. In 2012, the average operating rate of the entire industry fell to about 50%. In 2014, the domestic methane chloride production capacity has reached 2.44 million tons. In 2015, affected by the hot demand in the previous year, the contrarian expansion of production capacity has brought more serious overcapacity problems. Among them, Ruyuan East Sunshine 50,000 tons/year plant was normally opened in early 2015, Jiangxi Liwen added 40,000 tons of plant into operation, and Guangxi Tiandong Jinyi Technology 100,000 tons of plant was launched in September, which changed the history of no manufacturers in South China. According to the statistics of Chemical Online, after 2015, the domestic methane chloride planned to add more than 1 million tons of capacity, among which the larger ones are: Leshan Fupeng Chemical Materials Co., Ltd. 200,000 tons/year, Jiujiang Jiuhong New Materials Co., Ltd. 400,000 tons/year, Jiangxi Zhengyuan New Materials Co., Ltd. 100,000 tons/year and Jinling Huaian Industrial Park 300,000 tons/year. More than half of the new production capacity is in East China, and a small part is in Central China and Southwest China. The overcapacity of the dichloromethane industry is on the rise.
Export Markets and Anti-Dumping Challenges
In the case of increased production capacity and sluggish domestic demand, exports have naturally become a life-saving straw. According to customs statistics, as of November 2015, the total export volume of dichloromethane in our country was 116,000 tons, the export volume increased by 301% year-on-year, and the average export price fell by 15%. Among them, 62.7% were sold to India, and 11.9% were sold to South Korea. According to statistics, there are relatively few dichloromethane producers in India, and the installed capacity is only about 400,000 tons. It is mainly used for pharmaceutical intermediates downstream. However, under the failure of India to achieve self-sufficiency, it still relies on foreign imports. The sharp increase in exports in 2015 has greatly alleviated the pressure of domestic oversupply on the one hand, and on the other hand, it has also brought serious negative effects: on April 7, 2015, India initiated an anti-dumping investigation on dichloromethane originating in China and Russia; on October 30, the Indian Ministry of Commerce and Industry issued an announcement imposing an anti-dumping duty of $163.7-232/ton on dichloromethane imported from China, causing a surge in domestic export costs and a significant weakening of export advantages.
Future Outlook
Looking at the ebb and flow of the dichloromethane market in the past few years, the road ahead is even more difficult. Faced with the current situation of serious overcapacity in the industry, the commissioning of new plants has not slowed down, and exports have encountered anti-dumping suppression. Market participants generally expect that 2016 will face a more severe test. The industry's operating rate may further decrease, and the market will also collapse. A new round of industry reshuffle may be inevitable. In the face of difficulties, the industry should strengthen self-discipline, upgrade its technical level, and adjust its industrial structure to better cope with the fierce market competition in the future.
