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Insight | Time:May 10 2018 10:18AM
Methanol supply and demand fundamentals to weaken
 
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China’s methanol price has been increasing on firm fundamentals combined with bullish macroeconomic news since this March. However, these supports have already been digested and the bullish sentiment is cooling down.

Supply side

1. Domestic production is expected to recover
The average operating rate of domestic methanol plants is likely to tick up in May and domestic production is expected to increase. Plants with a combined capacity of 5.35 million mt/yr are slated to restart in May, while the capacity of the plants that will shut for maintenance adds up to 2.67 million mt/yr.

As of May 9, methanol price in Taicang, the most active market in East China, was assessed at 3500yuan/mt, while that in Inner Mongolia, Northwest China at 2510yuan/mt. The price spread was at around 990yuan/mt, far above 500-600yuan/mt of freight for domestic materials from Inner Mongolia to Taicang. The arbitrage from other interior regions like Henan and Shandong Provinces to coastal regions in East China opened as well. Therefore, methanol market could be impacted by the arrivals of domestic supplies.

2. International methanol plants are restarting
Company Country Capacity (kt/yr) Status
ZPC Iran 3300 One unit closed on Apr 7 for maintenance lasting 50 days, the other closed on Apr 20 and restarted on Apr 28
FPC Iran 1000 Closed on Apr 21 for maintenance, to restart on May 14
SMC Oman 130 Closed on Apr 1, to restart on May 10
Petronas Malaysia 2420 1700kt/yr unit closed in end-Mar, restarted in H1 Apr
BMC Brunei 850 Closed on Apr 7, restarted in mid-Apr

Petronas and BMC restarted their methanol plants in Apr. SMC and FPC are going to restart their plants in near term. With these plants restarting, China’s methanol imports are likely to increase in June. In addition, OCI’s news plant in the US and Kaveh’s new plant in Iran may come on stream in May-Jun.

Demand side

Methanol-to-olefins plants are closing

MTO maintenance schedules
Company Location MTO capacity (kt/yr) Status Captive methanol
Yangmei Hengtong Shandong 300 Closed on May 2 for 15 days 200kt/yr methanol unit keeps running
Zhongyuan Ethylene Henan 200 Closed on May 5 for 40 days 500kt/yr methanol unit keeps running
Fund Ningbo Zhejiang 600 Closed on May 5 for 40 days  
Nanjing Wison Jiangsu 295 Closed on May 10 for 15 days  
Sailboat Petrochemical Jiangsu 833 To close in Jun  

The appetite for methanol will reduce notably in May, as some MTO plants with combined capacity at 1.395 million mt/yr are shut. In addition, Sailboat has turnaround plan in June.

Apart from MTO sector, some acetic acid plants have maintenance schedules as well. What’s more, Qingdao City will host 2018 Shanghai Cooperation Organization Summit in June, during which methanol’s downstream plants will be affected in Shandong Province.

In a conclusion, methanol supply and demand fundamentals may weaken. Coastal spot market remains high now on low inventory, but the market is steeply backwardated. The market may turn weak with prices of imported materials dropping if inventory increases.
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