Methanol supply pressure is not great, the fundamentals will improve further

The main contract of methanol futures went up to around 2500 CNY/ton and encountered greater resistance, and the price was supported by the 40-day moving average after the price came back under pressure. At the current point in time, we are still optimistic about the methanol 2015 contract. However, because the growth rate of olefins is not as high as that of methanol, the downstream MTO unit has entered a theoretical loss state. The room and fluency for methanol to continue to rise will be limited by downstream profits, and the market outlook may fluctuate upward.

　　 Stable domestic supply

　　 The start-up load of domestic methanol plants was 70.57% last week, an increase of 1.33 percentage points from the previous month and a decrease of 0.93 percentage points from the previous year. Among them, the operating load in the Northwest region was 83.29%, an increase of 2.31 percentage points month-on-month and a year-on-year decrease of 2.21 percentage points. The resumption of operation of some methanol plants in Northwest China, coupled with the restart of some plants in Jiangsu, Anhui and other places, has increased the country's methanol operating load. On the whole, the domestic methanol operating rate remained high in the past month, which is not much different from previous years and is in line with seasonality. In the first quarter, some devices are expected to be put into production, but the spring maintenance in the first quarter is expected to offset the new production.

　　In terms of imports, the latest data shows that the overseas operating rate of methanol is 67.3%, which is 10 percentage points lower than the previous high and is at a low level in recent years. Iran’s Kaveh methanol plant with an annual output of 2.3 million tons was shut down for maintenance at the end of November last year, and the maintenance time was relatively long; the Iranian Marjan plant with an annual output of 1.65 million tons was shut down recently and is expected to be overhauled for about 45 days. Methanol imports are expected to continue to decline.

　　 Overall, methanol supply pressure was not strong in the first quarter.

　　 demand has weakened

　　 The average operating load of domestic methanol-to-olefin plants is 80.58%. Affected by the overhaul of large-scale olefin plants, the overall operating rate has dropped significantly. Most CTO/MTO plants operate stably, and a few plants fluctuate within a narrow range.

　　 In the traditional downstream, the operating rate of acetic acid is 74.8%, the operating rate of dimethyl ether is 20.5%, the operating rate of DMF is 67.3%, the operating rate of MTBE is 39%, and the operating rate of formaldehyde is 18.9%. The traditional downstream start-up load of methanol has fallen again after rebounding in December last year, and is at a historical low level during the same period.

　　 Overall, the short-term methanol demand has shrunk by a large margin, but in the medium and long term, four MTO/P units are expected to be put into operation and resume production in the first half of this year, which will bring about 3.5 million tons/year of methanol demand increase. Therefore, methanol demand is expected to remain positive.

　　 In terms of inventory, as of December 31, 2020, methanol inventory in coastal areas was 115.2 tons, an increase of 53,000 tons from the previous month, and the tradable supply is estimated to be around 216,000 tons. Overall, the current methanol inventory level is neutral. Although the absolute level is not low, the inventory pressure has eased a lot compared to the previous period. With the gradual improvement of supply and demand in the market outlook, methanol inventory is expected to continue to deplete.

　　 Future structure change

One of the more obvious changes at present is that the structure of methanol futures has changed from a long-term premium to a small discount, which means that the allocation of funds to methanol may be transformed from “empty allocation” to “over allocation”. The hedging pressure will ease. Structural changes mean that methanol prices tend to rise but never fall.

　　 To sum up, the short-term supply and demand balance of methanol will further improve the fundamentals in the medium and long term. At the same time, the current structural changes will also help prices rise. However, considering the current poor profitability of downstream olefins, methanol's continued upward space and fluency will be restrained.