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Insight | Time: Nov 20 2020 10:16AM
Methanol market remains strong, but price rise may slow down
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China methanol futures soar fast recently, on the back of supportive macro news, low inventory in China interior regions, and unstable plant operation in Iran. After the sharp increase in price, the rise slows down and methanol market is expected to plateau and consolidate at highs.

In terms of positive factors, US-denominated methanol price surged, driving up China domestic market. The average operating rate of international methanol plants has been hovering low, at around 60-65% since September. With the tight availability of CFR China cargoes, especially in Nov, the price kept rising. It is heard that a deal of non-Iranian Middle East-origin methanol cargoes loading in early Dec was concluded at $270/mt CFR China last week, on a par with 2,132yuan/mt (compared with prices for prompt goods at 2,120-2,125yuan/mt in East China in the week ending 13.) In addition, the premium on Iranian-origin methanol materials to formula price has increased to 10%. Driven up by the rise in CFR China price, domestic yuan market is propped up.

Besides, some methanol plants in Iran may shut for maintenance in winter. Kaveh’s 2.3 million mt/yr methanol plant has been running intermittently since Sep. Busher’s 1.65 million mt/yr methanol was shut in end-Oct, and ZPC’s one 1.65 million mt/yr plant was shut temporarily for 4 days. With other plants running stably, exports to China were barely affected. China methanol imports are expected to reach 1.25 million tons in Oct, 870kt of which comes from Iran. In Nov, China is expected to receive 1.15 million tons of imported methanol, and that from Iran will not reduce sharply according to the delivery schedule.

As for negative effects, the growth of demand for methanol is slow. Though demand for methanol in fuel application increases in winter, the operating rates of MTO and MTBE plants could be lowered. The composite operating rate of methanol’s downstream derivative plants is expected to drop marginally, and the overall consumption of methanol will also be dependent on the growth of fuel application.

There’s also pressure from new methanol plants. Shenhua Yulin plans to start trial run on its 1.8 million mt/yr coal-based methanol plants on Dec 20. Xinlianxin Jiujiang’s 600kt/yr coal-based methanol plant is slated to start on Dec 26. Meanwhile, Tinjin Bohai Chemical plans to start its 600kt/yr MTO plant in Q2 2021, and Fund Energy (Changzhou) plans to restart its mothballed 330kt/yr MTO plant in the first quarter of 2021. In addition, some long-idled MTP (methanol-to-propylene) plants, including Shandong Huabin’s 100kt/yr MTP plant and Shandong Daze’s 100kt/yr MTP plant have restart plans.

With methanol price rising, producers can make profits, and supply and demand fundamentals turn more balanced. The market is expected to strengthen with less fluctuation in short term.
[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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