Methanol price is not likely to fall sharply in the short term

Stimulated by the start of production in Luxi and the delay in warehousing due to port closures, the main methanol futures contract recently started to rebound, but it fell back in the session yesterday. It is estimated that short-term methanol is unlikely to fall significantly given the expected improvement in the supply and demand side.

Limited incremental supply 

In terms of domestic start-up, this year’s natural gas-to-methanol plant will be shut down due to gas restrictions. The load will be implemented at the end of November. Currently, the affected capacity is about 4 million tons. It is estimated that 200,000 tons of methanol output will be lost in December, compared with November.

Due to the advance preparation of PetroChina and Sinopec, the shortage of gas sources has improved compared with previous years. The gas limit time of natural gas-to-methanol companies is expected to be about one month, that is, the unit may be restarted early next year, and the maintenance time will be significantly reduced compared to previous years. The impact caused by mobile devices has also been greatly reduced compared with previous years. In terms of new production capacity, there is no new production capacity planned to be put into operation during the year. There will be more new methanol production capacity planned to be put into operation early next year, about 2 million tons, and the possibility of putting into production is high. Therefore, it is expected that the supply-side pressure will be greater early next year. In addition, the estimated import volume in November was 1 million tons, and the estimated import volume in December increased significantly, ranging from 1.1 million to 1.2 million tons. On the whole, the supply side in December had a limited increase compared to November.

Significant increase in demand

In terms of MTO, Luxi has been put into production in early December. It was shut down due to a breakdown last week and has a restart plan recently. Yangmei originally planned to overhaul in December. The current time is to be determined. It is estimated that MTO demand for methanol in December will increase significantly from November. However, there are fewer new MTO production capacity scheduled to start early next year, so demand growth is limited.

In terms of traditional downstream, the recent start of formaldehyde continued to decline, because the current demand is off-season, coupled with the advance of corporate holidays, it is expected that the start of formaldehyde will weaken. In terms of acetic acid, 800,000 tons of Thorpe units were shut down last week. As of the week of December 12, the acetic acid start-up dropped slightly to 88.16%. It is expected that the overall change in acetic acid start-up will be small in the later period. Overall, traditional downstream demand is unlikely to pick up. It should be noted that the demand for methanol fuel will generally increase in winter, and the current price of methanol is at a low level. It is expected that the demand for methanol fuel will increase in the later period.

Therefore, although the traditional downstream demand is reduced, the overall demand for methanol has increased significantly.

In addition, it is difficult for the port to continue to depot. As of the week of December 12, port inventories slightly rebounded to 941,700 tons, mainly due to less arrivals. It is understood that most of the cargoes will arrive at the port in the middle and late stages, so it is expected that it will be difficult to continue to depot in the later period.

In short, as import sources are concentrated in Hong Kong in mid-to-late December, the price of methanol may fall back, but the possibility of a big drop is unlikely.