Southern Shandong Methanol Arbitrage Window Opened Again

In southern Shandong, the methanol prices have kept rising for two weeks, supported by the good performances in the futures and coastal markets as well as downstream restocking demand. The weekly price increase in recent two weeks was over 2% each.

After the National Day holiday, one major olefin plant was shut down for maintenance, and the inventory level at some traditional downstream plants was moderate. As a result, local methanol demand was insipid. Moreover, the newly-added methanol unit in central and northern Shandong was put into operation after the holiday, leading to larger supply-demand pressure. The methanol prices in southern Shandong slipped. Consequently, the arbitrage window between central Shaanxi and southern Shandong remained closed until end-October.

The inventory level at ports gradually declined in recent two weeks. The methanol prices in East China stayed at a high level due to lacking import arrivals. Some inland resources were delivered to the coastal areas, which effectively eased the supply pressure in southern Shandong. With the supply of merchantable resources becoming tight, the market sentiment in southern Shandong strengthened, pushing up local methanol prices.

It is heard that the major olefin plant plans to restart in H2 November, and it has started to purchase feedstock periodically. Thus, the methanol supply in southern Shandong was tighter, and some producers controlled the sales volume. The methanol prices kept rising consequently. In addition, the arbitrage window between central Shaanxi and southern Shandong will keep open, which will relieve the supply-demand pressure in surrounding areas.

SCI reckons that with the major olefin plant restarting and some other olefin plants lifting operating rates, local methanol supply will remain tight in the near term. Then the methanol prices may continue to rise, and the arbitrage window may remain open.