South American Methanol Resources Aim at China Market
Introduction: In recent months, a large amount of South American methanol cargoes flowed into China, attracting the attention of some players in the coastal market. According to SCI, the import volume from Trinidad and Venezuela is expected to reach 195.5kt and 68kt respectively in August, both rising sharply M-O-M and Y-O-Y.
The monthly methanol import volume from South America hit a new high in recent five years.
On the one hand, the methanol output in the U.S. rose gradually from 2015 to 2019, leading to sufficient supply. During H2 June to late July, 2019, the methanol prices slumped in Europe and the U.S., and even dropped below Chinese prices for the first time. On the other hand, the U.S. sanctions on Venezuela continued. Therefore, those South American arbitrage resources which were originally destined for the U.S. were shipped to the Asian market. Venezuela had stopped delivering methanol resources to the U.S. since end-May but directly shipped cargoes to Europe and China.
In August, the import volume from Trinidad is expected to reach 195.5kt, surging by 144.99% M-O-M and 471.64% Y-O-Y. Meanwhile, the import volume from Venezuela is predicted to reach 68kt, while the number was zero in July 2019 and August 2018. In addition, SCI estimates that the import volume from Saudi Arabia will soar to 118kt in August 2019, up 67% M-O-M and 65% Y-O-Y. And there is still a considerable amount of methanol from South America and the Middle East to arrive in China in September.
The methanol inventory in Jiangsu reached a new record in recent eight years.
Except those which had been ordered by the downstream plants, the imported cargoes delivered to Jiangsu increased notably in August. There were several reasons. First, the newly added MTO unit in East China has realized stable operation. Second, the import price was lower than domestic price, and the price spread enlarged. Third, most importers and foreign traders fixed ports and tanks in advance for the delivery of 1909 contract. Some importer and downstream plants also ordered the tanks in July and August for the storage of September and October arrival imported cargoes. As a result, some cargoes whose discharge ports were still not fixed faced tough sales, and the traders had to cut offers to stimulate the sales. This also explained why CFR China kept slipping from early July.
The inventory at the minor storage areas, such as Taizhou and Jiangyin, also rose greatly. Most of the methanol tanks in the storage areas along the Yangtze River have been occupied in advance, especially the storage areas for delivery and downstream plants. Up to August 15, the inventory in Jiangsu (Lianyungang is excluded) grew to 738.5kt, reaching a new record in recent 8 years. However, from late August to early September, the methanol inventory will continue to increase with more resources from South America and the Middle East.
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