The situation of oversupply of methanol is difficult to reverse in the long run

In the past month, international crude oil prices have fallen sharply, and in addition to the oversupply of methanol, methanol futures and spot prices have both dropped significantly. Zheng alcohol's main contract once fell to 1,531 CNY/ton, setting a new low since the listing of methanol futures.

Mainland supply and demand side expected to improve

Since March, domestic social public events have been effectively controlled, the circulation of goods and the procurement of raw materials have resumed. After mid-year, devices such as Yunmei and Chuanwei have been lifted. In addition, Yuntianhua and Chitianhua have restarted. By the beginning of April, the effective operating rate of methanol was 72% -73%.

Due to the severe social and public events in February and limited logistics, methanol producers have a significant accumulation of inventories. The peak inventory period in northwest China in mid-to-late February was around 380,000 tons. Shipment pressure coupled with the weakening global chemical market, the pricing power of manufacturers has basically been lost, and olefin factories have significantly reduced prices. The spot price in the northwest region has hit a new low in recent years. Inner Mongolia has basically hovered around 1,400 CNY/ton, and Shanxi has also dropped to about 1,450 CNY/ton.

In the case of a large-scale domestic methanol production loss, the manufacturer's willingness to overhaul has increased, so that the supply and demand in the mainland market in April-May is expected to improve. Based on the current data, it is estimated that the capacity of maintenance equipment will exceed 5 million tons in April and 5.3 million tons in May. Currently, the production of olefin units in East China has resumed, and goods have been sold smoothly in the Mainland. The methanol inventory in the Northwest China has gradually been reduced to below 300,000 tons. There is little inventory pressure from manufacturers, and the willingness to increase prices is strong. If the spring maintenance of the methanol plant is fulfilled as scheduled, the oversupply in the mainland market may be temporarily reversed.

Port uncertainty is strong

The sharp decline in international crude oil prices has a significant impact on the port methanol market. In overseas markets, the annual consumption of methanol in 2019 is about 33 million tons, and the consumption structure is obviously different from that in China. Among them, the formaldehyde market accounts for about 35%, MTBE is about 17%, and others include biodiesel and acetic acid. Currently, overseas methanol prices have fallen significantly. The low-end FOB price of the US Gulf is around US $ 220 / ton, and the low-end price of Southeast Asia CFR has fallen to US $ 180 / ton. The domestic import profit is around 100-200 CNY/ton.

Substantial weakness in overseas markets has strongly impacted port prices. At the same time, the slow recovery of traditional domestic downstream demand for methanol and large inventory pressures further suppressed methanol prices. Methanol prices in ports and Shandong areas once hit record lows. As of April 2, the total inventory of ports in East China and South China was 764,500 tons. In terms of imports, the volume of methanol imported cargo arriving at the port from April 3 to 19 was around 530,000 tons, and the quantity was still relatively large.

Overall, port market demand recovery is relatively slow, and the impact of social public events on imports is also difficult to determine. The overhaul of European and American installations has increased, Iranian production is normal, and Saudi Arabia's large AZ installations have also resumed.

Traditional downstream to be restored

Olefin market consumption is stable, starting at around 75%, and the profit is at a median level. Coastal MTO installations have also been gradually overhauled, and the load still has room for improvement. Traditional downstream is still not optimistic. In terms of formaldehyde, downstream plate exports are blocked, and domestic infrastructure and real estate starts are also at a low level. As of April 6, prices have dropped to 775 CNY/ton, with start of construction at around 23%. In terms of acetic acid, the operating rate of acetic acid has risen to about 78%, but domestic demand continues to be weak, while exports are almost stagnant, market competition is fierce, downstream procurement is cautious, and prices have fallen to 2000-2100 CNY/ton. The price of MTBE also fell sharply to 3,500 CNY/ton, but the price of international MTBE has dropped to about 1,700 CNY/ton, and the willingness to purchase overseas sources domestically has increased significantly. While gasoline demand is weakening, oil blenders and refineries purchase cautiously, and MTBE starts to fall to about 35%.

Overall, the recent domestic methanol oversupply situation may be improved. However, there are more than 5 million tons of new production capacity in Iran and Trinidad and Tobago this year. It is estimated that 12 sets of equipment will be added in China, with a total of 8.55 million tons of production capacity. It is difficult to reverse the oversupply situation.