Coastal-Inland Methanol Price Spread to Narrow with Flow from Coastal Market to Inland
Introduction: The price spreads between Jiangsu and Anhui, Shandong and Northeast China, and the price spread between Guangdong and Hunan, Jiangxi, etc. expanded consistently to RMB 110-120/mt, with China’s coastal methanol prices fluctuating downward to a low level from late August. As a result, more goods flowed from coastal provinces (Jiangsu and Guangdong) to other areas, including Shandong, Anhui, Dalian, Hunan, Jiangxi and so on, causing more frequent flows of inland and port goods. If the price spread between port and inland enlarges further in the future, the methanol goods in East China may see a sustained flow to the inland market, which will curb the inland market and promote the national methanol price to seek a new balance, narrowing the price spread between the inland and coastal markets.
It is known that East China is always a relatively large consumption area for methanol, so most inland resources flow to the East China market for profits. However, the methanol flow amount from major producing areas to East China slid persistently, as the new large-scale MTO units were added intensively and integrated units increased from 2013 to 2018 in Northwest China. Methanol import volume surpassed 10,000kt for the first time in 2019, reaching 10,895.8kt. A phased supply-demand imbalance in East China appeared, forcing the East China market to release its supply pressure by flowing goods to the inland market to get a supply-demand balance. From 2019, the phenomenon of methanol from East China flowing back into the mainland market occurred 5 times in total. With the opening of the arbitrage window between the coastal market and its surrounding inland market, coastal goods flowed to Anhui, Shandong and other areas.
From the beginning of September, the price spread between Jiangsu spot methanol and south Shandong price grew to RMB 80-100/mt, pushing the goods in north Jiangsu and south Jiangsu to flow to south Shandong, Anhui, Jiangxi, etc. In September, between the Guangdong market and other markets, such as Hunan, the price spread broadened to RMB 150-220/mt, causing more goods in Guangdong to flow to Hunan, Jiangxi, and other areas.
The weekly pickup increased in coastal areas in September.
Coastal methanol inventory continued climbing to a new historical high level in line with the intensive arrival of imported cargoes, but the pickup also rose in most public warehouses. From September 5 to September 18, the weekly pickup reached more than 3.9kt in Taicang, up 1-1.4kt compared to the end of August. Moreover, the pickup in Guangdong was stable-to-ring, too. The overall pickup in Guangdong advanced to 6kt from September 12 to September 18, and more goods were sent from Guangdong to Jiangxi, Hunan, and other areas.
Inland methanol market prices fell on good flow from port to inland.
In some areas (Shandong, Anhui, etc.), along with the flow growth of low-priced goods from ports to inland, downstream plants showed resistance to inland high-priced methanol, and the regional supply-demand pattern changed somewhat as the rigid demand weakened but supply increased gradually. Therefore, the methanol prices dropped in Shandong, Northwest China, Anhui, etc. In addition, the flow may ease the port supply pressure to some extent. Therefore, the port methanol prices are likely to maintain narrow fluctuations.
All in all, the port methanol prices may be supported to some extent by good flow from port to inland, pre-holiday stockpiling on rigid demand and a slower loading rate in a certain country in the Middle East in late September. It is predicted that the coastal methanol prices may remain fluctuating in a range of RMB 2,250-2,400/mt in the short term.
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