Coastal Methanol Market Prices Fluctuated Downwards on Quick Inventory Buildup
In the middle of October, the coastal methanol market returned to the dominance of weak fundamentals, with the prices dropping persistently. Up to October 18, the spot price in the Jiangsu market closed at RMB 2,432.5/mt, down RMB 185/mt or 7.07% from October 8. The major drag was the oversupply caused by the large rise in the port inventory after the National Day holiday.
China’s methanol industrial operating rate has been maintained at a relatively high level of 70%-75% since August, staging an uptrend in the methanol output. However, most downstream products faced continuous inventory buildup due to increasing output, end demand dull and export reductions, leading to sustained cuts in feedstock purchasing. In the inland methanol market, cheap resources increased in the wake of intensified supply-demand imbalance. After the holiday, the coastal methanol market prices fluctuated at a relatively medium-to-high level of RMB 2,500-2,600/mt, opening the arbitrage window between inland and coastal markets, and the delivered price of inland resources to Jiangsu were as low as RMB 2,330-2,400/mt. Therefore, important downstream plants at ports chose to purchase cheap inland resources but sell high-priced imports in a bid to further optimize feedstock cost. Consequently, the spot demand from traders and downstream users declined, and the delivery at the public storage tank farms at ports decelerated persistently, followed by price drops in the coastal market.
With the influences from the port congestion caused by typhoons, cargo issues, etc. weakening, the unloading of imports was accelerated substantially after the holiday, and the total weekly unloading volume continued to advance. From October 11 to October 17, the total unloading volume of imports climbed to 325kt, up 146.9kt or 82.48% from last week. The spread between the forecasted arrival volume and actual unloading volume of imports narrowed, and the total volume of floating imports decreased. Accordingly, the port inventory buildup speeded up notably, with the weekly growth rate expanding to 7%-8% after the holiday.
As for the port inventory and market prices, the two are negatively correlated most of the time. The major factors influencing inventory changes are still supply, demand and market expectations. Recently, market expectations have altered in line with the rollback in market prices. Traders and downstream users held stronger bearish and wait-and-see attitudes, reducing their methanol purchasing volume. Facing heavier sales pressure, the coastal methanol suppliers had to cut offers to promote sales, dragging down the market prices. It is predicted that the coastal methanol market prices may remain in a downtrend, fluctuating in the range of RMB 2,350-2,500/mt.
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