There are many hidden concerns in methanol’s market outlook

The pullback of crude oil will be one of the driving forces for the weakening of methanol, but the situation in the Middle East is not yet clear, let alone crude oil factors. At present, the main downstream methanol production has fallen into losses again due to the rise in methanol prices and the weakness of polyolefin prices. Based on futures trading, PP currently has a loss of about 200 CNY/ton. There are too many devices, and the whole has entered an oversupply, and prices are unlikely to improve. If a methanol-to-olefins company suffers a long-term loss, it will inevitably lead to large-scale long-term maintenance and cause demand to decline. Although the current methanol inventory in the port area has dropped to less than 900,000 tons, after the closure of the backflow with the mainland and the re-opening of positive arbitrage between the mainland and the port, the port reservoir area may gradually increase. Starting with 900,000 tons of inventory, accumulation will be a very fast thing. It is understood that the two major methanol-to-olefins plants in Zhejiang have already revealed their plans for maintenance in February 2020.

On the other hand, during the Spring Festival of 2020 at the end of January, the traditional downstream demand will begin to decline significantly in the middle of this month. Because the Spring Festival is earlier this year, the downstream recovery after the Spring Festival will be slower than in previous years, or in the second lunar month. The currently exposed southwest hot gas methanol plant will be restarted in mid-January, which will make matters worse.

Due to a centralized repair of domestic methanol installations in August in 2019 and a second centralized maintenance due to an accident in November, domestic methanol spring inspections may be weaker than in previous years in the first quarter of this year. In Hubei, new construction was 500,000 tons per year, and in Inner Mongolia, 900,000 tons were newly built. Two sets of new methanol plants with annual capacity of 700,000 tons per year in Shaanxi are basically stable. The 2.2 million tons of new methanol units in Ningxia are planned to be commissioned before March this year, and the pressure on the mainland supply has reappeared.

On the foreign side, due to the large number of accidental overhaul devices from December 2019 to January 2020, this spring's inspection might not be as good as expected. Mismatches caused by accidents will be corrected one after another.

In summary, the current rise in methanol due to many favorable overlays has basically come to an end, and the surge caused by the unexpected large increase in crude oil has also been achieved. The callback pressure of methanol after continuous over-rise has appeared. Around the Spring Festival, the restart of the methanol plant in the mainland and the maintenance of the methanol-to-olefins plant in the port area overlapped, which may cause great pressure on the market. After the short boom of methanol, there are many hidden concerns. At this time, the risk of catching up again is increasing, and it needs to be treated rationally.