China Methanol Price Rebounded amid Supply Reduction and Cost Support
After the middle of July, the global important consumption markets saw a rebound in methanol prices. Both notable supply reduction and intensive downstream restocking supported the market to rally from the previous quick decline. However, the future market is predicted to fluctuate under downward pressure in the near term, given the slow demand recovery and expected feedstock price declines.
In H1, 2022, China’s methanol operating rate was slightly lower from the same period of last year. Up to June 30, the average operating rate was 71.88% in China, down 1.11 percentage point Y-O-Y. However, the global methanol operating rate averaged 74.72% in H1, 2022, up 9.4 percentage point Y-O-Y, as most overseas methanol units ran at high loads most of the time, especially those in the Middle East.
Entering July, there were frequent production reduction or outages in and outside of China, especially in mid-July. As showed in the above charts, the weekly operating rate dropped to a yearly low in the week (July 15 to July 21) in both China and the global market. According to SCI, the methanol operating rate in China fell to 68.12% in China, down 1.56 percentage point Y-O-Y, and that declined to 62.94% in the global market, down 5.06 percentage point Y-O-Y.
In China, methanol units with the capacity of 5,410kt/a took maintenance mainly due to routine maintenance and cost pressure. In the overseas market, many units were shut down for maintenance in the U.S., the Middle East and South America, dragging down the global methanol operating rate but supporting the global methanol prices.
As shown in the above chart, the profit at the methanol producers in Northwest China has been negative in recent two months (mid-May to mid-Jul), with the profit losses of RMB 100-370/mt. According to SCI’s years of monitoring, this is a relatively long period of profit loss since 2014, and it is expected that the profit loss will continue for some time, given the peak demand season of feedstock.
The recent intensive unit maintenance in the overseas market has provided some support to the methanol market, and it is predicted that the coastal methanol market prices may fluctuate in the range of RMB 2,400-2,550/mt in the near term. However, it still needs time for the demand recovery, and market mentality has no obvious change. In addition, feedstock prices still have some downside potential. In a longer term, the market is projected to remain weak, and market players should continue to pay close attention to the changes in feedstock price and supply-demand fundamentals.
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