China Coastal Methanol Prices Mount on Expected Supply Cuts
After the National Day holiday, methanol prices failed to rise steadily due to the below-expectation restocking demand, intensive arrivals of imported cargoes and low-priced inland resources arriving at ports. However, from late October, suppliers tended to keep offers firm on the back of higher import costs and the gas restriction at home and aboard, and methanol market prices rebounded accordingly.
Three methanol units with a total capacity of 4,950kt/a in a certain country in the Middle East were shut down for maintenance due to insufficient natural gas supply from October 26 to 27. Meanwhile, two methanol units with a total capacity of 3,300kt/a were cut loads to 50%, affecting about 53% of local methanol capacity and the time of unit maintenance was earlier compared with the previous years. Besides production issues, the loading decelerated in early November. Vessels intensively arrived at ports of a certain country in the Middle East for loading, but most were still waiting for plants’ shipment schedule. In addition, the commissioning of one Asian newly added methanol unit has been delayed. All these shored up suppliers’ mentality greatly, followed by methanol price rises.
Influenced by the unstable production in Europe, the U.S. and Southeast Asia, the supply of non-Iranian resources remained tight for a long time, failing to meet the demand in Europe, so local methanol prices were elevated to a high level of $435/mt. With the arbitrage window between Europe and Asia open, both Chinese and overseas enterprises actively looked for bonded goods and suitable ships for export. Among them, China’s resources had a notable price advantage, so the volume of re-exports in Jiangsu and Guangdong ports saw a great MOM increase of 59.1kt and the cargoes were mainly sold to South Korea and Europe.
The overall supply of non-Iranian cargoes was tight, so methanol importers were more willing to sell cargoes to Europe and other Asian markets besides the performance of domestic long-term contracts, considering export profits and transportation distances. The supply tightness of non-Iranian cargoes pushed up the USD prices in China, while the RMB prices in the coastal market remained low. Thus, many Chinese importers were reluctant to continue to sell with profit losses, further bolstering the coastal market prices.
Up to now, in a certain country in the Middle East, one 1,650kt/a methanol unit has resumed production, and the operating rate of one 1,650kt/a unit has been lifted from 50% to 80%, but it is still uncertain about when other units will be restarted or take maintenance. At present, the downstream purchasing frequency is largely steady, and most market players are cautiously optimistic. Overall, the unstable production of overseas units will remain an important bolster for the coastal methanol market in the near term.
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