Methanol’s rebound space is limited

Since December 2019, with the increase in the maintenance of external disk devices, the market expects that methanol imports will decrease significantly in the first quarter of 2020, and the spot price of methanol will also rebound. In December 2019, the Zhenganol Index rose by 10.25%, and methanol in Jiangsu area spot prices rose by 16%. At present, natural gas-to-methanol plants have resumed production. In addition, new plants have been put into operation, and domestic methanol supply is generally sufficient. At the same time, there has been no new production of methanol-to-olefins.

Overall domestic supply is sufficient

Entering January 2020, most of the natural gas-to-methanol plants in the southwest and northwest are expected to resume production (including restarted production): 600,000 tons in Qinghai Zhonghao, 800,000 tons in Guilu, Qinghai, and 1 million tons in Inner Mongolia Boyuan. 2020 will still be the year when the methanol plant is put into production. The first quarter of these plants will include: 600,000 tons of Yanlin Yulin Nenghua and 1 million tons of Inner Mongolia Rongxin Phase II. It is estimated that the resumption and new commissioning of methanol plants in the first quarter of 2020 will involve a total capacity of 5.35 million tons.

Methanol enters traditional demand off-season

There is no bright spot in methanol demand in the near future: there is no expectation of new production of methanol to olefins, and the traditional demand for methanol has peaked and dropped. Since 2019, due to good profits, the operating rate of methanol to olefins has been maintained at a high operating level of more than 85% for a long time, so there is limited room for continued improvement in the subsequent operating rate. With regard to the commissioning of the new plant, the trial run of Luxi Chemical's MTO plant at the end of November 2019 successfully boosted the market to a certain extent, but the plant restarted shortly after a short stoppage, and still maintains low load operation. In 2020, there are fewer plans to put into operation methanol-to-olefins, and they will all be in the second half of the year. The short-term contribution to methanol demand will be limited.

Traditional demand such as formaldehyde and MTBE is gradually entering a seasonal period of falling negative load near the Spring Festival. The operating rate has begun to decline. It is expected that the work will gradually resume after the Lantern Festival. Recently, among the chemical companies in Henan, affected by environmental protection policies, many formaldehyde and dimethyl ether companies have ceased operations. Although upstream methanol companies have also reduced their burdens, the overall impact on downstream has been greater.

In summary, the recent overhaul of external disk installations has resulted in a reduction in arrivals, but comprehensive follow-up maintenance and commissioning plans are expected to have a relatively limited impact on overall imports. At the same time, domestic methanol supply is sufficient overall, coupled with the recent lack of new production of methanol-to-olefins, traditional demand is in the off-season, and the rebound in methanol prices is expected to be limited.