Methanol: new installations continue to be put into use, signs of weakening demand are obvious

Since mid-May, supply has continued to recover, demand has significantly weakened, and methanol prices have fallen sharply. In the future, as domestic methanol plants resume production, new capacity continues to be put into operation, and overseas supply rebounds, methanol supply pressure will continue to manifest.

Recently, methanol fundamentals have weakened, but the surge in crude oil prices and coal prices still supports methanol prices to a certain extent. Methanol prices are expected to fluctuate widely in the short-term, and the mid-line should be mainly short on rallies.

New devices continue to be delivered

In the first half of the year, the center of gravity of domestic methanol prices continued to rise. On the one hand, it is the cost support brought by the rise in crude oil and coal prices. On the other hand, the centralized maintenance of methanol installations in March and April in China led to the shrinkage of supply in the Mainland, and the recovery of overseas import sources was not as expected. Domestic methanol supply was tight, and ports The tradable supply continues to remain low. In this context, methanol prices oscillated upward.

But since May, the global supply of methanol has continued to increase with the gradual resumption of production of the global pre-maintenance equipment and the launch of new equipment. From the perspective of domestic supply, methanol production in May rebounded sharply from April. At the same time, Guangxi Huayi Energy Chemical's 1.8 million tons methanol plant is expected to be put into operation at the end of June. In addition to the 5.5 million tons production plan in the second half of the year, the mainland supply pressure will continue to appear. In terms of imports, domestic methanol imports have increased for four consecutive months since February, and domestic port inventories have continued to rise since the end of May. It is expected that 6.5 million tons of new methanol plants in the United States and Iran will also be released, and domestic import pressure will increase. Increase.

Signs of weakening demand are obvious

In the first half of the year, the operating rate of domestic coal-to-(methanol) olefin plants has always maintained a high level. Driven by the demand recovery, olefin prices have risen sharply, and the profits of MTO plants have also increased significantly. However, as the demand for olefins has gradually entered the off-season, olefin profits have declined from a high level, and once fell to near zero at the end of May. In this context, the operating rate of olefins has dropped significantly, and some plants are still expected to fall negatively, and the mid-line suppresses methanol demand.

In terms of traditional demand, due to the influence of the southern rainy season, the operating rate of sheet metal factories has dropped, and the overall formaldehyde market has been weak; the price of acetic acid remained strong in the first half of the year. Under the background of the expansion cycle of polyester production, the demand for acetic acid was driven, but some PTA factories announced July Reduce the supply, or reduce the demand for acetic acid; driven by the increase in crude oil, the demand for MTBE blending has increased significantly, and MTBE performed well; the supply and demand of dimethyl ether were weak, and the price was average. On the whole, the overall performance of methanol downstream has weakened, and there is limited support for methanol prices.

The effect of cost support weakened

After May Day, the price of crude oil rose sharply, approaching the high since 2018. At the same time, the domestic coal supply was tight and coal prices rose sharply. Driven by this, the price of methanol rose. However, due to the gradual weakening of methanol's own supply and demand, the ratio of methanol to crude oil, methanol and thermal coal has dropped significantly since the end of May, indicating that the supporting effect of methanol cost on methanol prices is gradually weakening. As supply pressure continues to rise, the main driver of the methanol market will shift from the cost side to the supply and demand side.

To sum up, since mid-May, as the supply side has continued to recover and the demand side has weakened due to the off-season, the price of methanol has fallen sharply. In the future, as domestic methanol plants resume production, new production capacity continues to be put into operation, and overseas supply rebounds, pressure on the methanol supply side will continue to manifest. However, the current crude oil prices are relatively strong, and coal prices are still at a high level, which still supports methanol prices. It is expected that methanol prices will oscillate broadly in the short-term. As supply pressure continues to increase in the later period, the mid-line methanol prices will run under pressure.