The methanol market is both bullish and bearish, but the market outlook is still consolidating

The domestic methanol market is in a situation of oversupply, but production is at a loss. With cost support and supply and demand suppressed, it is expected that the methanol 2109 contract will continue to oscillate in the future.

Since late June, the methanol 2109 contract has ushered in a slight rebound after constructing the bottom W pattern, rising from 2,430 CNY/ton to 2,600 CNY/ton. However, due to methanol's own weak fundamentals, futures prices continued to rise weakly.

Domestic and foreign production capacity has been released one after another

Recently, the phenomenon of high methanol premiums at domestic ports has basically disappeared. There are two main reasons behind the return of valuation: First, after the spring overhaul of methanol plants, the supply of methanol in the Mainland has gradually increased, which has led to a decline in spot prices in the Mainland and the opening of the port arbitrage window. Some low-priced mainland sources hit the port market. The data shows that the newly put into production of China Coal Eenergy's 1 million tons/year capacity reached full capacity in mid-June, and Northwest inventories have been rising for three consecutive weeks since the end of May. Data from Jinlianchuang shows that as of the week of June 25, the average operating rate of domestic methanol plants was 70.50%, an increase of 0.23 percentage points on a week-on-week basis, an increase of 3.48 percentage points year-on-year, and an increase of 3.06 percentage points from the average of the same period in the past three years. According to the trend of methanol plant operating rate in the past seven years, the operating rate of methanol plant will bottom out at the end of June, which means that domestic methanol production will continue to increase in the second half of the year.

Second, as the methanol plants in Europe, America and Iran resume production, external production capacity is gradually released, which in turn leads to the end of the destocking phase of methanol at domestic ports and the start of the accumulation cycle. As of mid-June, East China and South China had reached 310,000 tons of methanol in Hong Kong weekly, the first time it exceeded 300,000 tons in nearly six weeks. Judging from the current shipping schedule, if the ship arrives and unloads in Hong Kong normally, the amount of methanol arriving at Hong Kong at the end of June and early July will not be less than 310,000 tons. The continued arrival of overseas methanol in Hong Kong caused domestic port inventories to begin to rise at the end of May. According to statistics, as of the week of June 25, the total inventory of East China and South China ports was 524,700 tons, an increase of 115,200 tons month-on-month, an increase of 28.13%.

Domestic and foreign output has increased, and the port methanol price has dropped to 2,500 CNY/ton, a record low in the past one month, and the price gap with the mainland is also narrowing.

Downstream demand enters off-season

The formaldehyde industry, which is the traditional downstream demand for methanol, is in the low season of consumption during the rainy season in the south. The weakening of sheet demand has gradually reduced the operating rate of formaldehyde plants. As of June 25, the operating rate of the formaldehyde plant was 22.2%, a decrease of 0.2 percentage points from a week-on-week basis. At the same time, the operating rate of the dimethyl ether plant also fell to 17.56%, a decrease of 0.29 percentage points from the week to week.

In the emerging area of methanol consumption, the methanol-to-olefin plant is undergoing rotation inspections, which has led to a decline in the operating rate of the olefin plant. As of the end of mid-June, the olefin plant operating rate has dropped from the previous high of 90% to 80%. Among them, Jiutai’s olefin plant is initially scheduled to undergo a 25-day maintenance on July 2; the China Coal Mongolian University’s plant is expected to be overhauled in July, and the restart time is yet to be determined.

The cost support effect is still

The current domestic coal supply tightening and high prices are still supporting methanol. Calculated by manufacturing cost, as of June 25, the manufacturing cost of Northwest Coal-to-Methanol was 2701.29 CNY/ton, while the contract price of methanol 2109 was 2591 CNY/ton. The futures disk was at a loss and the profit margin was -4.08%; Shandong Coal-based The manufacturing cost of methanol is 2738.29 CNY/ton, and the futures disk is also at a loss, with a profit margin of -5.38%. It can be seen that the profit margin in June has shrunk significantly from the 20%-25% in January-May. The market outlook is driven by the recovery of the profit margin of the methanol industry, which in turn supports the renewed strength of the methanol 2109 contract.

Generally speaking, the methanol market is both bullish and bearish, and the price lacks clear guidance. The subsequent consolidation of the range will be maintained.