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Insight | Time:Feb 8 2018 9:48AM
Imported and domestic methanol showing divergent trends
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China’s coastal methanol market started to retreat from its high end in mid-Jan. The price of domestic materials in East China kept falling in Feb, while that of imported materials halted the downtrend and stabilized gradually. Then, how come the coastal methanol market is showing divergent trends?

1. Continuous drops in domestic materials in inland China
China’s inland methanol market had been declining since mid-Jan, as product inventory was high, producers were keen to let go of cargoes but demand waned. As of now, the market in Northwest China is stabilizing, while that in other interior regions sustains the losing streak. After the sharp decrease in methanol price in inland China, the arbitrage window to coastal regions has opened with price spread widening. The cost to deliver domestic materials to Jiangyin and Changzhou of Jiangsu Province has dropped below 3,000yuan/mt, thus price of domestic materials in Jiangsu, East China keeps slipping.

2. Imported materials stay firm

Methanol inventory reduced to 506.6kt in coastal regions as of Feb 1. The inventory fell 27kt in Taicang, the most active market in East China in the week ending Feb 1, therefore, merchant supply tightened notably. Lately, H1 Feb cargoes need be delivered, and short-coverings sentiment is active in the market. While shipments are expected to arrive later, the urgent requirements could hardly be met in dearth of supply. Hence, the price of imported materials stabilizes and even gains some increases.

The price spread of imported to domestic methanol in coastal regions is currently hovering at around 200-300yuan/mt, which is rather high. However, the spread is expected to normalize gradually, as inland market is poised to stabilize and imported cargoes are set to arrive at port regions.
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