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Insight | Time: Jul 21 2020 3:09PM
Methanol supply-demand rebalancing takes longer
 
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Crude oil price has been rising since the second half of May, from $30/bbl to above $40/bbl. The rise in crude oil coupled with upbeat economic data have driven up methanol futures price from 1,700yuan/mt in May to above 1,800yuan/mt in July.

However, China methanol port inventory has been remaining over 1 million tons since May, with storage tanks reaching the maximum capacity. As downstream plant operating rate has recovered to normal level, further increase in demand for methanol would be limited, while the reduction of local supply is not enough to revert the supply and demand situation. It is tough for spot methanol price to track the uptick in futures, and the spot-futures price spread has widened to more than 200yuan/mt.


Including inventory in East and South China

China methanol price slumped to the lows due to the outbreak of pandemic early this year, and it has yet to recover to the previous levels. Bearish market sentiment prevails, spot market barely moves up after the rise in futures, downstream buyers are not keen to buy and discussions come to a standstill.

Meanwhile, some previously-shut local methanol plants are restarting after methanol price increases. In the end of Jul to the beginning of Aug, several methanol plants with combined capacity of 3 million mt/yr are slated to be back to production.



As for demand, Jiangsu Sailboat shut its 800kt/yr MTO plant Jul 16 night accidentally die to power outage, which could lead to loss in demand for methanol of 140kt. The diminishing demand added to the woes of methanol market fundamentals which has been grappling with supply glut. Zhongyuan Ethylene plans to shut its 200kt/yr MTO plant on Jul 24 for maintenance lasting 3 months. In traditional downstream sector, requirements for feedstock methanol reduced in formaldehyde plants in Shandong due to environmental protection inspection.

It still takes time for the rebalancing of methanol supply and demand. The price could go lower and some outdated plants could get scrapped.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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