China Methanol Market Fluctuating on Expected Supply Reduction and Slow Demand Recovery
After the Spring Festival holiday, China’s methanol market buying was active, and the overall trading was smooth, which was mainly supported by the pre-holiday futures price rises, some downstream restocking demand and relatively sufficient confidence on the macro-environment in 2023. However, after short-time quick price rise, the methanol market negotiation entered a stalemate, and some high prices softened. Recently, the market has been influenced by frequent news of unit maintenance, so where the market will go?
China’s inland methanol market fell after rising, with the market price in Inner Mongolia up over 11% from that before the holiday.
After the holiday, methanol producers without inventory pressure raised prices, and traders were active in profit-taking. Methanol market prices rose quickly amid bullish expectations and downstream restocking demand. With the completion of downstream restocking, market trading slackened, and some high prices softened amid cautious sentiments.
Expected supply reduction and slow port inventory buildup still support methanol prices.
Currently, the major natural gas-based methanol units in Northwest China are still under shutdown, and some major methanol units in Central China have no restart plans temporarily. Except individual producers in Northwest China, the mainstream inventory at methanol producers is at a medium level. Recently, some methanol producers are scheduled to take maintenance or delay restart. It is predicted there may be a methanol supply gap of 2,000kt in February.
Table 1 Methanol Unit Maintenance Schedule
As for imported methanol, the port inventory rose somewhat with the intensive unloading after the holiday. However, current inventory is still at a relatively low level of recent three years. Although some overseas units are scheduled to restart, some units are planned to take maintenance, so it is expected the port inventory buildup may remain slow in the near term.
Downstream production recovery is different, leading to an uncertainty in supporting methanol price.
As shown in the Table 2, except formaldehyde and acetic acid, the operating rates of other major traditional downstream industries had no obvious changes after the holiday. it is learned that some major downstream plants in Shandong are raising operating rates steadily. However, some olefin units in East China are scheduled to take maintenance, and the major olefin unit has no clear restart time. Influenced by current high methanol prices, the production recovery of olefin units is still uncertain.
Table 2 Major Methanol Downstream Industry Operating Rate
On the whole, although there is an expectation of downstream demand recovery, high cost is still affecting downstream production to some extent. Mainstream methanol producers intend to maintain firm prices, but market players are still cautious about operation. With some producers in Central China cutting offers to stimulate sales, the market still needs time to accept high prices. However, after downstream operating rates are lifted, the methanol price is still likely to rebound.
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