Recent Macro Environment Influencing China’s Methanol Import

1. The Customs Tariff Commission of the State Council on August 3 unveiled lists of 5,207 items of U.S. products to be subject to additional tariffs of four different rates -- 25 percent, 20 percent, 10 percent, and 5 percent from August 23, 2018. Methanol is on the list of products to be levied of additional 25 percent tariffs.

From 2014 to July 2018, the volume of methanol imported from the U.S. was no more than 100kt at most of the time, which only took up a very small proportion of the total. The import volume in 2016 was a little higher, and that’s mainly because of the output increase from the newly added 2,300kt/a methanol unit in the U.S. that year. However, on the whole, the U.S. is still a traditional methanol importer.

In 2018, there is a newly added 1,750kt/a methanol unit put into operation in the U.S. around end-May, but the operation is still unstable. Thus, the supply to Asia including China is still uncertain. Although there is still nearly 6,000kt/a newly added methanol capacity scheduled to be released in the later period, the official commissioning time may be delayed indefinitely due to the strict EIA, capital and other approval procedures. In addition, according to the export details of methanol in the U.S. from 2015 to 2017, the major methanol export destinations for the U.S. were Northwest Europe, South Korea, Canada, etc. Therefore, SCI predicts that the U.S. will remain a methanol importer in the next 3-4 years, and the volume of methanol exported to China will be maintained at around 100kt each year. In this sense, the influences from the levy of additional tariffs will be limited for China both in the near and long term. Actually, this is harmful to the developing methanol industry in the U.S.

2. It was rumored that Kunlun Bank will pause the exchange settlement in Euro from August 1. Currently, Kunlun Bank is the only formal channel for the exchange collections from Iran.

According to the import data in the past several years, Iran remains the largest imported methanol origins for China. Although the U.S. and EU have levied severer economic sanctions against Iran since 2011, Asian buyers still obtained petrochemicals from Iran through flexible ways, considering the price competitiveness of Iran’s resources. However, on July 13, 2012, the U.S. Treasury announced the sanction against China’s Kunlun Bank, closing its settlement in US dollars. As a result, Kunlun Bank can only make settlement in Euro and RMB.

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