Q1, 2018 China Inland Methanol Market Review and Forecast

In Q1, 2018, China’s inland methanol market kept dropping till mid-March. In January, the units which took overhauls previously restarted in Northwest China, so the methanol supply increased gradually. Meanwhile, the transportation was curbed by the snowy weather. The inventory at some methanol producers accumulated somewhat. As for the downstream, the high methanol prices restrained the demand, and approaching the Spring Festival holiday, some traditional downstream plants lowered loads or shut down units in advance. With the supply and demand getting more imbalanced, the methanol prices kept slipping.

In February, although the sales in most areas has been finished, some methanol producers in Shandong still faced sales pressure and cut prices persistently. After the holiday, the inventory at methanol producers was high, and some natural gas-based methanol units recovered production near the end of the month. However, the demand was limited on low downstream operating rates. In such a climate, the methanol prices remained in a downtrend.

Entering March, with the demand rallying gradually, the trading atmosphere improved. In the middle of March, China Shenhua (Baotou) Charcoal Chemical Industry began to purchase methanol from the market, and some methanol units underwent maintenance. The supply of merchantable resources was comparatively tight, which pushed up methanol prices by a large margin. Approaching the end of March, the demand from some traditional downstream industries weakened somewhat, but some methanol producers maintained low inventory, and the spring intensive overhaul had started. Therefore, the methanol prices kept firm.

For the following market, there are several favorable factors. First, the methanol units in the major producing areas will take overhauls intensively, and the methanol supply will decrease in the near term. Second, the olefin plants in Northwest China purchase feedstock steadily, supporting local demand. Third, some foreign methanol units also have overhaul plans in April. Considering the decline in the volume of import arrivals, the market players hold bullish attitudes towards the arbitrage demand from the coastal market.

However, there are also some negative factors. On the one hand, with the prices rising, the downstream buying interest will decline. On the other hand, the Shandong market, the major methanol consumption area, may be affected by the rectification of plate plants in southern areas. And the SCO meeting to be held in June will influence the downstream production to some extent. This will also affect the market sentiment in advance.

On the whole, the methanol supply will largely remain tight in April, and the prices are predicted to mainly adjust at a high level.