Tight LNG Supply Influenced Regional Methanol Supply and Price

China’s natural gas resources are relatively scarce. Entering the heating season, the supply of natural gas became tighter. Influenced by this, some natural gas-based methanol units were shut down or cut loads. The methanol supply in some regions was tight.

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According to SCI, up to November 2017, China’s methanol capacity is 80,230kt/a in total. Thereinto, the capacity of coal-based methanol is 57,160kt/a, taking up 71% of the total. The capacity of natural gas-based methanol is only about 9,000kt/a, accounting for 11% of the total. The natural gas-based methanol units are concentrated in Southwest China, such as Sichuan and Chongqing.

In November, the operating rates of methanol units in Sichuan were around 40%, and those in Chongqing were over 50%. Entering the heating season, the supply of natural gas became tighter. The 500kt/a natural gas-based methanol unit at Sichuan Lutianhua was shut down for maintenance in early November. Afterwards, Sinopec Sichuan Vinylon Works and Sichuan Kabeile also cut operating rates. In addition, in other areas where natural gas-based methanol units are concentrated, such as Qinghai area, Zhonghao and Guilu have announced their unit overhauls will last until after the Spring Festival.

Due to the unit shutdown in Qinghai area, the players in Chengdu had to purchase goods from the central Shaanxi. Thus, the methanol sales in central Shaanxi were smooth in these days, and the prices remained at a high level. With the purchase cost rising, the negotiation prices also kept firm in Chengdu’s methanol market.

For December, most methanol downstream industries are in an off season, so the demand for methanol can hardly improve. Currently, the methanol prices are comparatively high, and most downstream plants just maintain the purchases on need-to basis. In such a climate, the supply-demand imbalance in some regions may influence the whole market. The market players are suggested to pay close attention to the production of methanol and downstream units in each region.