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Insight | Time: Jun 22 2020 4:03PM
China methanol producers struggling with poor economics
 
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China methanol production margin has been declining since Jan, when the epidemic broke out. It fell to the break-even line in Feb and had continued worsening since then.



Since May, China local methanol plants has entered turnaround season. However, as several major plant shutdowns coincided with downstream MTO plant maintenance, and traditional downstream plant (MTBE, DME, formaldehyde, acetic acid, etc.) operating rates were low, China methanol price was barely bolstered in the turnaround season.





Meanwhile, due to the outbreak of pandemic outside China, demand evaporated, and thus influx of methanol flooded into China. East China methanol inventory kept mounting and storage tanks were reaching the maximum capacity with high volume of methanol imports together with imports of other chemicals. Some methanol imports are now being diverted to Guangxi and Tianjin, however, the storage capacity in those provinces is also limited.



High inventory and acute storage tank shortage weighed methanol price lower, while demand was still retrained by the pandemic. China imported more than 1 million tons of methanol in Apr, and the monthly amount is expected to remain above 1 million tons for the months to come. Therefore, participants are await for any local supply reduction in China.



It is calculated that the production cost for methanol producers based on bought coal is at least 1,400yuan/mt and even up to 1,650yuanmt for some plants. Based on the ex-work methanol prices in inland China, producers are under severe losses. It goes same for natural gas-based methanol producers. However, as some methanol producers deal with various business, and have their schedule of production and sales, they could still survive while some are struggling.



There’re signs of domestic production cuts, but also there’re new plants starting production. It will be a challenge for China methanol market players. Some outdated plants could get scrapped.



[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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