Reasons Behind Methanol Port Inventory Decline
From late September to early November, the import arbitrage space turned from positive to negative, and more important coastal MTO units were shut down. However, the coastal methanol market saw continuous inventory reduction. What are the reasons behind this decline? And how the coastal market will run in the near term?
1. More coastal market resources back flowed into the inland market due to continuous price spreads.
In previous years, China’s methanol trade flows were mainly from west to east and from north to south (from the inland market to coastal market). However, from late September to H2 October of 2021, the inland market prices remained higher than the coastal market prices, and the price spread was relatively large. Meanwhile, the demand kept stable in the inland market, while local supply declined. Therefore, more coastal methanol resources flowed into the inland market.
2. The methanol inventory dropped in East China because of constant demurrage, closure of navigation and outflow of more cargoes.
In East China, from mid-October to early November, the delivery volume rose notably at the important storage areas in Jiangsu. More cargoes were delivered from Taicang, Changzhou and Nantong to Shandong, Anhui and Henan. Some cargoes were shipped from Jiangsu to Northeast China, Hubei and Hunan. According to SCI, the daily average delivery volume of one storage area in Taicang was 4,607.14-5,700mt from October 29 to November 4. In early November, the delivery volume in Taicang increased notably compared with mid-October, and the volume of delivery by both ship and truck went up. Although some wharfs began closure of navigation again from November 5, but the delivery at the important storage areas in Jiangsu remained good. The daily average delivery volume of one storage area in Taicang was 4,833.33.14-6,500mt from November 5 to November 7. From late October to early November, the daily average delivery volume at Taicang reached a yearly high. According to SCI, from October 1 to October 17, 30-40kt of methanol resources were transported by truck from Jiangsu to Shandong, Anhui, Henan, etc. Therefore, the methanol inventory in East China kept declining.
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