2021 China Methanol Industry Annual Data Interpretation
In the recent five years, China’s methanol market has been under slightly oversupply. During this period, the changes in supply and demand had obvious influences on the price trend. In 2021, besides the fundamentals, the unusual fluctuation in feedstock prices was another key price driver for methanol. From January to October, the average methanol price in Inner Mongolia rose by 53.14% Y-O-Y. However, due to notable feedstock price increases, the theoretical profit loss at methanol producers expanded from last year.
Fundamentals and cost once pushed up methanol prices to a historic high.
In 2021, the main price drivers were supply, demand and cost. On the supply side, increased maintenance and prolonged turnaround periods greatly impacted the methanol price. From March to May, unexpected maintenance was intensively seen at China’s inland methanol producers, leading to a decline in the overall supply, so the price was pushed up. From June to August, with the maintenance period coming to an end, the supply trended normal, weighing on the price. In September, the supply dropped unexpectedly in China’s inland market, with the monthly operating rate and output hitting a lowest level since July 2020. On the demand side, in 2021, the global demand kept recovering continuously, and the downstream demand was favorable in China’s inland market from January to June when the operating rate of the olefin industry stayed at a high level, so the methanol price rebounded. In addition, the major cost of methanol was in a rising cycle in 2021, which played an important role in the digestion of social inventory and also directly pushed up the methanol price.
Notable cost increment intensified methanol profit losses.
In the first ten months of 2021, the average profit of coal-based methanol was RMB -167/mt, and the methanol producers suffered severe profit losses from last year. The major reason was that the price growth of methanol was smaller than that of feedstock. In China, over 70% of the methanol resources are produced by coal. In 2021, high coal prices resulted in high production cost at methanol producers. Although methanol prices also went up, the profit losses expanded.
Methanol supply tightened amid less-than-expected output and import.
The annual average operating rate of methanol units is estimated at 70% in 2021. In recent five years, the overall methanol operating rate has showed an uptrend, but it is slightly lower in 2021. In the first half of the year, the production was relatively stable, and the output increased with the release of newly added capacity. However, in the second half of the year, some units took maintenance for a longer time due to tight feedstock supply, and the operating rate slid gradually, followed by an obvious output reduction.
In 2021, the methanol import volume increased in H1 but fell constantly in H2. During the first 9 months of 2021, there were five months witnessing the monthly import volume of below 1,000kt. Imported methanol is a crucial supplement to the methanol market supply in China, and the import volume change is closely linked to the supply-demand balance in China. Due to the public health event and the comparatively low methanol prices in China, the monthly methanol import volume declined notably. However, the demand for imported methanol in China is inelastic, and the methanol import volume is expected to increase gradually with the release of newly added methanol capacity in the Middle East and the Americas.
Methanol export volume grew notably.
The monthly average export volume rose significantly in 2021, and there were four months witnessing the monthly export volume of over 30kt in H1. In 2021, the arbitrage window between China and other Asian countries remained open. In addition, the public health event and the high natural gas prices caused continuous supply gap in some Asian regions.
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