Coastal Methanol Market Prices Rebound on Supply Tightness
After the Qingming Festival, China’s coastal methanol market experienced a beyond-expectation rebound. Up to April 19, the spot price in Taicang closed at RMB 2,712.5/mt, up 4.73% from end-March. Multiple bullish factors including constant supply tightness, intensive short-covering demand, geopolitical uncertainties, etc. together pushed up methanol prices. In the near term, methanol supply may remain at a medium-to-low level, still providing some upward momentum for the coastal market prices.
In Q1, after intensive shutdown caused by gas restrictions, the restart of overseas methanol units was later than expected. Meanwhile, some unplanned production outages were extended, and the startup of newly added units was delayed. In Q2, there are still many units with a total capacity of 6,220kt/a scheduled to take maintenance in Southeast Asia, South America, Europe and the U.S. In China, the capacity of methanol units involved in maintenance is estimated at over 10,000kt/a. In addition, considering the tension in the Middle East, the import volume may keep low once local production and shipment are affected. Therefore, there is still a large uncertainty about the supply growth in Q2.
In April, the overall downstream demand kept favorable in the coastal market, with the major downstream industries such as MTO and acetic acid maintained relatively high operating rates, providing stable rigid demand. A few MTO plants due to bearish expectations only prepared half-month feedstock inventory, thereby lengthening spot purchase cycles. Most acetic acid and formaldehyde plants had relatively reasonable feedstock inventory but still had some feedstock purchases. Meanwhile, some short-selling traders had to purchase to make delivery or fulfill contracts, bringing intensive short-covering demand.
Overall, there are still many domestic methanol units are scheduled to take maintenance from late April to May, and it also needs time for the import supply to recovery substantially. Thus, the methanol supply is expected to remain at a medium-to-low level in the near term, which will continue to support the coastal methanol market. However, downstream users still show resistance to high feedstock prices, pressure methanol prices to a large extent. It is predicted that the coastal methanol market prices may fluctuate in the range of RMB 2,600-2,750/mt in the near term. Market players should continue to pay attention to the production and profitability of MTO units.
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