The recent rise in the price of methanol is largely caused by insufficient structural supply due to gas restrictions in the Southwest. The southwest region still needs the supply of East China, and the tight supply problem in East China will not change in the short term. However, on the whole, the maintenance equipment is driven in a centralized manner, and the demand has not improved. The problem of oversupply in the methanol market will intensify. In addition, the inventory in the Northwest is high, and the market is under pressure to reduce prices.
Trading backflow reduces port inventory
The heating season is coming. Earlier this month, gas-head methanol producers in the southwestern region have successively received notices of industrial gas supply restrictions. Affected by this, the southwest gas methanol plant Lutianhua, Jiuyuan Chemical, and Chongqing Kabele have stopped. Due to insufficient structural supply, local methanol supplies are tight. As of December 6, the spot price of methanol in the southwest region was 2190-2200 yuan/ton, up 100-110 yuan/ton from December 4. Correspondingly, the spot price in East China is between 1980-2000 yuan/ton, plus the water freight cost of 140-150 yuan/ton, and there is still a cross-regional arbitrage profit of 40-70 yuan/ton. In this case, the methanol spot in East China returned to the Southwest, resulting in a decline in port inventory. As of December 5, the inventory of methanol ports was 758,500 tons, a decrease of 359,900 tons from the high on September 19, a decrease of 32.13%. Among them, the inventory of methanol ports in East China was 632,500 tons, a decrease of 328,500 tons compared with September 19, a decrease of 34.48%; the inventory of methanol ports in South China was 126,600 tons, a decrease of 30,500 tons, or a decrease of 19.49 compared to September 19 %.
High inventory in Northwest China
The production capacity of Southwest China accounts for 7.6% of the total domestic methanol production capacity, while the consumption is only 4.14%. It can be said that Southwest China is a region with a net outflow of methanol. Local methanol consumption is 200,000 tons. Generally, the gas restriction in the southwestern region will last until March of the following year, and supply will stagnate for at least three months. At present, the local enterprise has only 50,000 tons of inventory, which is far from meeting the demand for three months. In previous heating seasons, gas shortages in the southwest caused the local methanol supply gap to be mainly filled by the northwestern region. However, the price in the northwestern region is currently high, only 215 yuan/ton lower than the southwest region, and 400-620 yuan/ton higher in the same period last year. The current price difference is not enough to cover the transportation cost of 300-400 yuan/ton, so it is difficult for the Northwest region to flow into the Southwest this year. At present, the inventory in the northwestern region is relatively high. As of December 4, the inventory of local methanol production enterprises was 260,800 tons, an increase of 87,800 tons compared with the same period last year, an increase of 50.75%. High inventory, coupled with warehouse depots in winter, the price of methanol in Northwest China may fall in the later period, which will stimulate the inflow of Northwest China to the southwest.
Overall supply over demand is difficult to change
In December, the methanol plant overhauled in the early stage is planned to resume production intensively. According to data from Longzhong Information, it involves 6.82 million tons/year of production capacity. In addition to the 1.9 million tons/year gas methanol plant shutdown in the Southwest, only 600,000 tons/year of Heilongjiang Baotailong was newly overhauled this month, and the overall domestic supply is on the rise. In addition, in the early stage, the shipping schedule was postponed, and a large amount of methanol remained. In the later stage, as the concentration of methanol in the port, the inventory of ports in East China will accumulate again. In contrast to supply, there is no bright spot for traditional demand. MTO is affected by rising methanol prices and profits have fallen significantly. In the later period, downstream companies' raw material procurement may decline.
Based on the above analysis, the futures price of methanol will continue to rebound, but time and space are limited.
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