China Coastal Methanol Prices Expected to Go Up
As we all know, the restriction on natural gas supply in the Middle East usually starts in December and lasts till February or March of the following year, but this year, the time has been advanced to late October. Up to November, the number of units taking maintenance in a certain country in the Middle East had increased to five, involving 68% of local capacity. Against such a background, the expected substantial reduction in import supply strengthened market players’ confidence about price rebound, and combined with stable downstream production, methanol prices fluctuated upwards in H1 November.
However, the coastal methanol inventory didn’t drop smoothly as expected but continued to build up. With the price spread between methanol and downstream products expanding gradually in November, methanol demand weakened amid downstream resistance to high methanol prices. Moreover, the arbitrage window between inland and coastal markets was opened, allowing cheaper inland resources to flow into the coastal market constantly. Consequently, the coastal inventory climbed to a yearly high in early December. Up to December 5, the methanol inventory in Jiangsu mounted to 722kt, up 221kt or 44.11% compared with the same period last year. In such a climate, the coastal methanol prices fell back.
Afterwards, the domestic important conference released positive signals, improving the market mentality. As for supply-demand fundamentals, the maintenance capacity in a certain country in the Middle East increased to about 90% in mid-to-late December, leading to sharp declines in local shipments. In addition, several natural gas-based methanol units in Southwest China also started maintenance in late December. These all shored up methanol prices from the supply side. The expectation of decreases in import arrivals continued, and intensive downstream delivery brought notable destocking at ports, supporting methanol prices to rebound again.
Currently, both bullish and bearish factors are mixed in the market. On the one hand, some coastal MTO units are expected to be shut down or cut loads in the later period. Entering H2 December, Northeast Asian ethylene prices fell to $860-865/mt, while the USD price of methanol climbed to $309-310/mt, narrowing their price spread. The substitution effect of ethylene has strengthened and the import supply of methanol is expected to decrease, so some MTO units may be shut down or run at lower loads in order to avoid profit losses. On the other hand, market optimistic expectations have been stronger. For one thing, it is predicted that the intensive unit maintenance in the Middle East, Southeast Asia, Europe and the U.S. will cause a large loss of imports in January and February 2025. For another, export cargoes may continue to increase with the arbitrage window between China and overseas markets open. In addition, traders and downstream users have stockpiling demand before the Spring Festival holiday, and the operating rates of most downstream industries have been relatively steady since December, which all contribute to the destocking at ports, thereby supporting methanol prices to move upwards in the near term.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
