Methanol's downstream demand in the third quarter will be fulfilled in a concentrated manner

In the long run, downstream demand will be concentrated in the third quarter, and supply is not expected to increase significantly, and the methanol market may reverse its weakness relative to other chemicals.

Recently, the spot price of methanol futures has been significantly weaker than that of other chemicals, mainly due to poor market expectations for the market outlook and the decline in crude oil prices. However, from a practical point of view, methanol inventory continues to decline and demand is strong. We believe that methanol may still rise in the market outlook.

Short-term expectations are weak

Entering April, Inner Mongolia Boyuan Phase 2 600,000 tons/year natural gas to methanol plant and Qinghai Zhonghao’s 600,000 tons/year natural gas to methanol plant have restarted. Inner Mongolia Rongxin 900,000 tons/year, ENN 600,000 tons/year, Donghua 600,000 tons/year, Jiutai 1 million tons/year and other pre-overhaul methanol installations will also be restarted one after another. In addition, China Coal Group’s Inner Mongolia Turk’s 1 million tons/year methanol plant is expected to be commissioned early this month, and about 5 million tons/year will be produced in April, but only less than 2 million tons/year will be overhauled. Northwest delivery pressure will be concentrated in the middle of this month, when the strong methanol in the Mainland will come to an end.

From the downstream point of view, the current operating rate of FORMALDEHYDE has increased and the demand for methanol has increased, but Mtbe and dimethyl ether enterprises have entered the seasonal off-season. In terms of methanol-to-olefins, two units of 600,000 tons/year in Nanjing and 600,000 tons/year in Inner Mongolia have postponed their maintenance scheduled for last month. They are expected to be overhauled at the end of this month or early next month. The downstream demand for methanol is expected to weaken.

Another factor that has recently contributed to the strong methanol price in Northwestern China is the sharp increase in transportation vehicles and the decline in freight rates. At present, the freight from Inner Mongolia to Lubei has dropped to about 200 CNY/ton, down 100-150 CNY/ton from last month. In the market outlook, there will be fewer transportation vehicles, and freight rates may increase. Superimposed on the current general demand in North China, there is a risk of lowering Methanol prices in Northwest China.

Port inventory decline

This year is a year when new methanol installations have been put into production less. In total, only about 4.8 million tons/year are expected to be put into operation. However, the total new demand for methanol this year is about 7.8 million tons, which is superimposed on the loss of methanol production caused by Inner Mongolia’s “dual control”. The merger will create a supply gap of about 4 million tons/year. Newly built downstream, covering dimethyl ether, formaldehyde, methane chloride, MTBE, methanol to olefins, etc., the main production period is May-September. According to the current situation, there is a phenomenon of delayed commissioning of some installations, but it is likely to be in the third quarter Centralized production.

Methanol inventories in the port area have dropped from about 1.2 million tons at the beginning of the year to the current 850,000 tons. The total net import in the first three months of this year was about 2.6 million tons, which was basically the same as the same period last year, but the import volume dropped significantly from the end of last year. On the one hand, overseas demand has recovered, and the number of foreign shipments to China has decreased. On the other hand, there were more overhauls of international installations from January to February, and the actual international supply declined. High import prices and upside down are also an important factor in the decline in imports. The shrinking profits have caused a sharp decline in the enthusiasm of domestic traders to import.

In the first quarter, the domestic methanol industry had a record high operating rate of 76%, but the inventory did not accumulate; after the start of the spring maintenance in the second quarter, the market was in short supply and methanol prices rose. However, the lack of overhaul equipment this spring means that overhauls in autumn will exceed the same period of the previous year, and the realization of large-scale demand will be concentrated in the third quarter. If imports do not increase significantly by then, the port area will continue to depot, and methanol may be in short supply. .

From the historical perspective, methanol prices are prone to lows during the concentrated production period of methanol plants; high methanol prices are prone to highs during the concentrated production period of downstream plants. From this analysis, the structure of long-term supply of methanol exceeding demand may be reversed, and the port area inventory may fall below 700,000 tons.

To sum up, the recent methanol market is facing unfavorable factors such as the downstream seasonal off-season and the restart of methanol plants, and the price may fall. However, in the long run, downstream demand will be concentrated in the third quarter, and supply is not expected to increase significantly, and the methanol market may reverse its weakness relative to other chemicals.