Near-Term China Methanol Market to Keep Firm
Entering August, China’s methanol market continued an uptrend on the whole. Up to August 22, the methanol price closed at RMB 2,085/mt in Inner Mongolia and RMB 2,435/mt in Taicang, up 1.96% and 7.47% respectively from end-July. Although market expectations were bearish at the beginning, the gradually balanced supply and demand pushed up methanol prices greatly. It is predicted that the market could keep firm in the near term.
Domestic supply recovery was below expectation.
In August, China’s overall methanol supply rally was slow. Although the domestic methanol output increased gradually in line with higher operating rates, the inventory at methanol producers didn’t see notable buildup mostly because of early oversell and contract delivery. In addition, rising transport cost and delays in the startup of newly added units also slackened the methanol inventory accumulation. As for imports, except for two units with a total capacity of 3,950kt/a in the Middle East, most overseas units ran steadily. The overall output increased, but the flow into China was influenced by the actual tank capacity at coastal storage areas, port congestion, bad weather, etc. Currently, the inventory at methanol producers in Northwest China is at a medium-to-low level, while the port inventory is medium-to-high.
Methanol import cost climbed up.
Up to August 22, the CFR China price of imported methanol rose by 6.06% from end-July. The import arbitrage kept positive from July to August, expanding from RMB 60/mt in early July to around RMB 180/mt in mid-July and then narrowing to RMB 40-50/mt these days. Traders and downstream users purchased steadily to meet their hedging and production demand. Additionally, the 800kt/a MTO unit in Jiangsu was restarted in mid-August, further supporting downstream demand. In Q3, the dealing prices of cargoes from certain country in the Middle East rose from a premium of 0.25% to 0.5%-0.8%, surpassing those of non-Iranian cargoes gradually, and the prices of non-Iranian cargoes also went up accordingly.
Downstream demand kept stable in the slack season.
Market players are bearish most time of this year, especially downstream users. July and August are the traditional demand slack season, and supply was expected to increase, both exacerbating bearish expectations. However, the methanol price in Jiangsu rose from RMB 2,167/mt in early July to RMB 2,400-2,500/mt in late August. Although downstream users preferred to purchase at low prices, they had to purchase feedstock to maintain normal production, even if the methanol price was at a high level. The slack season is coming to an end, but methanol prices are not likely to fall to previous low levels. It is still uncertain that whether downstream users will purchase in bulk, the overall demand will be stable.
Forecast: It is predicted that methanol prices will keep fluctuating upwards in the near term. On the demand side, with end demand recovering, the operating rates of polyolefin and acetic acid units may rise gradually. The overseas demand is also expected to rally, shoring up methanol prices to some extent. On the supply side, China’s domestic supply is anticipated to further recover, but the import volume growth may be delayed, influenced by the postponed shipment of some cargoes, unstable production in certain country of the Middle East, tight tank capacity at coastal aeras, etc.
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