After “Mangkhut”, Where S-China Methanol Market Will Go in Q4?

After “Mangkhut”, Where S-China Methanol Market Will Go in Q4?

Super Typhoon Mangkhut landed at 5 p.m. on September 16 in Guangdong. The government of Guangdong Province has initiated emergency responses and ordered weather, civil affairs and mining safety departments to take precautions against the typhoon. Many cities have implemented emergency measures such as suspension of production, operation and transportation, widespread cancellation of flights and closure of highways. 

In 2018, the methanol prices in South China remained at a comparatively high level amid multiple influences. By the end of August, the average price was over RMB 3,200/mt.

After the Typhoon Mangkhut landed in South China, many cities have implemented emergency measures such as suspension of production, operation and transportation, widespread cancellation of flights and closure of highways. SCI contacted local methanol players immediately and learned that all local downstream plants had stopped production. As for the market trading, some players said that they were off on Monday.

In South China, the resources are mainly imported methanol. However, entering 2018, the changes in remittance and exchange rate resulted in higher import cost, which also pushed up local methanol prices. Some importers chose to re-export goods. There were 31.5kt of imported methanol re-exported in 2018. Thus, the inventory stays at a low level for a long time due to the slow accumulation.

On the one hand, the supply is tight. On the other hand, the demand is fairish, as local traditional downstream plants still gain profits in spite of high feedstock methanol prices. Overall, the supply and demand in South China is relatively balanced.

As for the future market, the import cost can hardly decline in the near term, which will continue to provide cost support. The supply-demand fundamentals will keep stable basically as long as the profit transmission is smooth. In addition, the players also should pay close attention to the futures market fluctuations. It is predicted that the mainstream methanol prices may fluctuate in the range of RMB 3,400-3,800/mt in South China in Q4.