Methanol: Reasons Behind Wide South & East China Price Spread
In Q1, 2023, China’s coastal methanol market fluctuated downwards most of the time. However, entering April, expected supply reductions supported the market to rise persistently, with the spot price climbing to RMB 2,550-2,700/mt. Meanwhile, the price in South China remained higher than that in East China from March. The price spread between Guangdong and Taicang was enlarged from RMB 10-50/mt to RMB 100-170/mt, and that between Fujian and Taicang was widened from RMB 100-130/mt to RMB 130-160/mt. It is predicted that with the supply recovering, the price spread between South China and East China may return to normal gradually.
Mar-April South China Methanol Supply
In April, the supply in South China turned tight. Although import volume increased with more imported cargoes arriving in South China, the growth was mainly in late and end-April. It was estimated that the import volume in South China rose by 58kt M-O-M, but local output dropped by 109.8kt, as the two units with the total capacity of 2,600kt/a at CNOOC South China and Guangxi Huayi Chemical started maintenance from April 13 to April 15. Thus, the supply reduction was larger than expected.
Compared with East Chin, the methanol consumption volume in South China was relatively small. But the methanol demand in Guangdong kept stable in April. In addition, the release time of imported cargoes arriving in H2 April was passively delayed for about 10 days, affecting the spot supply.
Forecast: The higher prices in South China attract more imported cargoes and inland resources from Southwest China, so the supply is anticipated to increase. However, the downstream delivery is relatively normal, and the actual release cycle of imported cargoes is still under influences. Thus, it still needs some time for the inventory to build up in South China in which the prices will remain higher in a short term. But in a longer term, with the supply recovering and inelastic demand weakening, the inventory in South China is predicted to rise, and the price spread between South China and East China may return to normal gradually.
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