Where is the value of chemical industry when methanol is reduced to fuel?

Looking back on the first half of 2019, the overall situation of the domestic methanol market is not optimistic. Since the beginning of the year, the methanol market has been shaking down all the way. By the end of June, the mainstream domestic price was about 2000 yuan (ton price, the same below), and even fell below 1800 yuan in Northwest China. For example, a large number of purchases in Inner Mongolia and northwest China were burned as alternative fuels in daily life. The industry lamented how methanol could be reduced to ordinary "fuel" and burned down, its value orientation and future market direction. Methanol is one of the basic organic raw materials used in the manufacture of chloromethane, methylamine and Dimethyl Sulfate and other organic products. It is also the raw material of pesticides (Insecticides, acaricides), medicines (sulfonamides, synthesizing dimethyl terephthalate, methyl methacrylate and methyl acrylate). In the chemical industry, it is widely used and has a long industrial chain. Its main value is reflected in the deep processing of downstream chemical products. The continuous low price deviates its value from its price.

In July, the release of multi-party news also made the market trend in the second half of the year "complicated and confusing".  Environmental Protection Inspection "Looking Back" - A new round of inspections began. Chemical safety accidents occurred frequently in the first half of 2019, and heavy efforts were made to improve environmental protection and safety in various cities. The impact of the impact on the chemical industry is obvious. Zhai Qing, Deputy Minister of the Ministry of Ecology and Environment, further stated at the press conference held recently by the State Council Information Office that, according to the deployment of the Party Central Committee and the State Council, from 2019 to 2020 and 2021, a new round of inspections will be carried out on the inspected objects in three years. We will make use of the year 2022 to carry out "looking back" in some places and departments. During the first round of environmental protection supervision, more than 200,000 chemical enterprises were shut down according to law, and nearly one million chemical enterprises were renovated. In recent years, environmental protection has become a norm, and after the explosion in the first half of the year, the safety supervision of the domestic chemical industry has only increased. The main downstream methanol and FORMALDEHYDE are affected more obviously. Demand in some areas of the Mainland has been weak and difficult to change. The expansion of other related downstream industries has become more cautious. Although some new downstream methanol-to-olefin plants were put into operation successfully in the first half of the year, the boosting effect on overall demand is still limited.

International Environmental Change-Import Patterns or Changes? Under the influence of the international macro-situation and policies since this year, the import and export environment has also been impacted to a certain extent. According to market participants, a domestic group terminated some shipping contracts imported from abroad. It is expected to affect the domestic methanol transport capacity of 70-80,000 tons/month, and it is difficult to have new capacity to replenish in the short term. At the same time, other units have plans to withdraw from the shipping market of some countries in the near future. According to the information available at present, the capacity of imported methanol in August was in short supply.

Of course, this has a positive effect on the domestic methanol market, but the volume of imports is relatively limited. In the first half of the year, the overall relaxed supply pattern of the domestic methanol market, whether the positive effect can be expected to land still has uncertainties. In the first half of 2019, domestic port methanol stocks remained high for a long period of time, and the new olefin plant did not meet expectations. Since July, spot prices have been bottoming out and cost support has been tested continuously under the condition of weak fundamentals. In the short term, the overall market tends to be weaker and may still be larger. At the later stage, we still need to pay attention to the methanol plant dynamics, downstream olefin plant operation progress, port inventory, freight level and futures trend.

Of course, due to the lower domestic prices, it is difficult for foreign low-price sources to enter in large quantities again. Whether methanol can break away from the "fuel" price in the second half of the year, although import is very important, whether domestic downstream enterprises can achieve production on schedule is even more important.