South China Methanol Prices May Fall Back

The methanol supply has been tight in South China since December 2017, supporting the dealing prices staying at a high level. With the imported cargoes arriving at ports intensively, the dealing prices tended to decline. Here SCI will make a brief analysis on the major influencing factors for the methanol market in South China.

On the supply side, the overall imported methanol resources were fewer in December. According to SCI, the arrival volume of imported methanol was about 71.2kt, down 11.55% month on month. In addition, the supply of Chinese-made resources also decreased by about 12.5kt, as the monthly output at CNOOC Kingboard Chemical was reduced by around 20kt in response to the natural gas limitation. Therefore, the tight supply of methanol became a normal state in South China in December.

On the demand side, the monthly consumption volume of methanol was 100-150kt in South China. The downstream industries ran steadily from December. Taking formaldehyde as an example, the average price in South China rose from RMB 1,745/mt in early December 2017 to RMB 1,965/mt in early January 2018, up 12%. Meanwhile, the operating rates of the formaldehyde units in the north was low curbed by the air pollution treatment in autumn and winter. Influenced by this, the formaldehyde sales were smooth in the south. Thus, although the methanol prices kept rising, the downstream demand was largely stable.

Recently the methanol inventory in South China kept low. As seen from the above chart, the methanol inventory and price basically showed an inverse relation. The import volume in January is expected to rise, so the inventory is likely to grow. From this point of view, local methanol prices may fall back.

On the whole, the tight supply will be eased, while the demand tends to weaken with approaching the Spring Festival holiday. SCI predicts that the overall methanol prices in South China have downside potentials.