Reasons Behind Recent Firm Coastal Methanol Market

SCI99

2020-01-02

Reasons Behind Recent Firm Coastal Methanol Market

The coastal methanol market showed an obvious uptrend from last week, and the prices rose sharply to RMB 2,100-2,200/mt, up RMB 260/mt or 13.33% within a week. Boosted by the firm coastal market, the methanol prices also went up in most inland areas.

SCI considers that the main reasons behind this sharp price rise are the intensive purchasing on rigid demand, continuous declines in the port inventory and the expected more foreign unit overhauls in Q1, 2020.

Although the imported cargoes delivered to the important downstream plants increased notably in East China in December, some 2020 long-term contracts were still under negotiation. In addition, the methanol units in the Middle East and Southeast Asia underwent maintenance successively from late November. Moreover, there are still foreign units expected to take overhauls in Q1, 2020. Thus, the traders and some downstream plants restocked or built up stocks. In H2 December, the inventory at ports dropped quickly.

Meanwhile, other traditional downstream plants also purchased actively, such as acetic acid, formaldehyde, chloride and silicone plants. In such a climate, the market became a sellers’ market, and most methanol suppliers controlled the sales volume to wait for higher prices. The speculators, foreign traders and domestic importers also anticipate that the merchantable spot goods will be extremely limited in January and February.

Actually, the supply from the inland market to the coastal areas was also very limited due to the shutdown or lower operating rates of the units in the inland areas. More importantly, the arbitrage window between the inland and coastal markets remained closed because of the lower methanol prices at ports.

In Southeast Asia, the methanol supply was also tight recently. In addition, Indonesia's President officially announced the B30 biodiesel blending policy on December 23. The methanol prices at some minor areas in Southeast Asia had climbed to $263-265/mt. Thus, some buyers from Vietnam and Indonesia intended to re-export goods from China’s coastal areas. In addition, the shipment from Iran to China was slow due to recent low transport capacity of Iranian cargoes. These factors also pushed up China’s methanol prices to some extent.

On the whole, the overall methanol market is still optimistic, and the coastal methanol market prices are very likely to continue rising in the near term. However, with the downstream users finishing stocking and the resistance to high prices appearing, the upward momentum will be weakened gradually. It is predicted that the coastal methanol market will keep fluctuating upwards, overall, but the players are still suggested to operate cautiously.

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