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Insight | Time: Mar 30 2021 11:18AM
China methanol sees a rebound, but gains capped
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China methanol markets were mixed in the first three months of 2021. In Jan, coastal methanol market dipped slightly, while inland market declined sharply as producers were keen to reduce inventory prior to Lunar New Year holiday. In Feb, both markets strengthened, while in Mar, coastal market moved up before pulling back rapidly but inland market stayed firm before falling in the middle of the month.

In Mar, coastal methanol inventory hovered low, while inventory in inland plants kept decreasing. In the latter half month, however, methanol market pared gains, tracking the slump in international crude oil prices.

Several Chinese domestic methanol plants typically carry out maintenance in spring, hence the name Spring Turnaround Season. In Mar 2021, domestic plants with combined capacity over 5 million mt/yr could be shut for maintenance. The total capacity under maintenance in Mar could reach more than 9 million mt/yr with the plants shut earlier included.

Previously-shut plants due to natural gas restrictions
Region Company Capacity (kt/yr) Status
Northwest China Berun 400 Shut on Nov 1 2020, restarted on Mar 1
Northwest China Berun 600 Shut on Nov 1 2020, to restart on Mar 30
Northwest China Qinghai Zhonghao 600 Shut on Nov 1 2020, restarted on Mar 28
Southwest China Sichuan Luzhou 400 Shut on Dec 12 2020, restarted on Mar 26

Methanol plant maintenance in Feb
Region Company Capacity (kt/yr) Status
Southwest China Yunnan Xianfeng 500 Shut on Feb 1, restarted on Mar 17
East China Yankuang Guohong 640 One gasifier shut for 40 days
South China CNOOC 600 Shut on Feb 25 for 45 days
North China Tongmei Guangfa 600 Shut on Feb 26, restarted on Mar 25

Methanol plant maintenance in Mar
Region Company Capacity (kt/yr) Status
Northwest China Xinneng Energy 600 Shut on Mar 9 for 20 days
Northwest China Yankuang Rongxin 1800 Shut on Mar 22 for 25 days
Central China Henan Hebi 600 Shut on Mar 11, restarted on Mar 20
Southwest China Chongqing Chuanwei 770 Shut on Mar 15, restarted on Mar 26
North China Jinmei Tinaxi 300 Shut on Mar 16 for 25 days
Northwest China Donghua Energy 600 Shut on Mar 18 for 25 days
Northwest China Jiutai Energy 1000 Shut on Mar 23 for 10-15 days
Northwest China ECO Coal Chemical 300 Maintenance cancelled

Due to the requirements to reduce energy and achieve carbon neutrality in Inner Mongolia, some methanol plants brought forward the maintenance plan. For example, Jiutai Energy was earlier slated to shut the 1 million mt/yr methanol plant in Apr together with its MTO unit for maintenance, but had brought the maintenance at methanol plant to Mar 23. Demand for methanol from MTO units increased in Northwest China, leading to drops in methanol plant inventory. In addition, inland methanol price was bolstered by rise in coal price, while coastal methanol price pulled back. In late Mar, Inner Mongolia producers lowered prices, and the offers approached to market prices.

Though methanol supply would contract due to plant maintenance in Mar, there would be plants with combined capacity of about 5 million mt/yr poised to restart by the end of Mar, on a par with the capacity for maintenance in Apr. Hence, domestic methanol supply would not reduce further in Apr, while imports were expected to increase and demand was unlikely to improve notably.

In addition, China Coal Ordos Energy and Chemical has started its new 1 million mt/yr methanol on Mar 24, and is poised to start feeding on Apr 6 and begin MTO-grade methanol production in the first half of Apr to provide feedstock to China Coal Mengda’s MTO plant. Some methanol producers’ contract with China Coal Mengda woule expire in end-Mar, and the contract supply from those producers could reduce. Moreover, Guangxi Huayi is slated to start its 1.8 million mt/yr new methanol plant in mid-Jun, and is expected to start production in early Jul. Its 500kt/yr acetic acid plant would start at the same time, but there would be still a large amount of methanol for sale.

In a conclusion, domestic methanol supply shrinks and the price rebounds with improvements in fundamentals. However, there could be ling-term pressure from plant restarts, and the rebound is capped amid cautious sentiment.
[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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