Methanol: Shrinking demand leads to price drops

Thread Content

Methanol: Declining demand leads to price cuts Author/Source: Sinochem New Network Date: 2020-02-17 Clicks: 14 To control the spread of the COVID-19 pandemic, traffic restrictions have been implemented in many areas, which has significantly affected the logistics and transportation of methanol. Factories are accumulating inventory and reducing their production levels; meanwhile, demand from downstream industries has dropped sharply, forcing methanol producers to cut prices in order to remain competitive. As of February 12, the prevailing spot price for methanol at production sites in Inner Mongolia was 1,465 yuan per ton (the same unit is used thereafter), a decrease of 235 yuan compared to February 7, representing a decline of around 8.4%. 　　Slow flow of supply sources According to Cui Zhiming, a methanol analyst at Longzhong Information, in order to prevent the spread of the pandemic, traffic controls have been implemented in many areas across the country, which has disrupted various transportation routes and made it difficult to transport methanol across provinces. Currently, there are frequent inspections at checkpoints in the Northwest region, which is the main production area of methanol in China; it is difficult to find truck drivers, and the shipment of methanol as a whole is facing challenges. 　　Regarding ports, shipments from Sichuan and Chongqing to Jiangsu are currently operating normally, but strict inspections are required upon arrival. Shipments to Hubei and Hunan are largely on hold. As a result, the methanol pricing for enterprises in Sichuan and Chongqing has dropped from 2,110 yuan on February 7 to the current level of 2,070 yuan. 　　“Currently, various provinces have introduced policies to ensure smooth passage for vehicles transporting emergency supplies. In some provinces, the \"Pass\" can be used as a basis for transporting coal and chemical products within those provinces, which helps to reduce transportation obstacles. However, due to differences in the policies implemented and their enforcement levels in various places, cross-provincial logistics remains significantly affected. In particular, the flow of methanol from the main production areas in the northwest to downstream sectors is relatively slow, resulting in a lag in demand. ”Xue Fei, a methanol analyst at Zhuochuang Information, said. 　　Inventory levels are starting to rise. “Due to transportation constraints, the inventory levels of methanol manufacturers are currently higher than before the holiday period, with some areas seeing an increase of 0.5 to 2 times.” Although it is still within acceptable limits for now, inventory levels among enterprises in some regions are already at moderate to high levels, such as in Shanxi Province. Due to the limited number of methanol downstream enterprises in Shanxi Province, the local capacity to utilize methanol is restricted; as a result, most of the methanol supply ends up in regions such as Shandong, Henan, and Hebei. Although companies reduced their methanol inventory to the lowest levels before the holiday this year, the impact of the pandemic has led to a slow recovery of logistics after the holidays, making inter-provincial transportation difficult. As a result, most methanol producers in Shanxi Province now have inventory at moderate to high levels, and there is a trend of reducing these inventories. ”Cui Zhiming said. 　　Affected by the pandemic, most methanol manufacturers across the country are reducing their production rates to prevent inventory buildup. Currently, the average operating rate of methanol producers in China is 66.9%, down 4.29% compared to the same period last year. Among them, the operating rate of methanol manufacturers in the Northwest region was 77.14%, down 3.1% compared with the same period last year. 　　“Overall, the operating rates of methanol manufacturers in China are showing a steady decline, by 3 to 10 percentage points; in some areas, the decline is even greater due to restrictions on raw material transportation. In Inner Mongolia, the decline in some enterprises was as much as 30%, while in parts of Guanzhong in Shaanxi, the decline in certain enterprises reached 50%. ”Cui Zhiming explained. 　　Demand has declined significantly. Recently, due to the impact of the pandemic, 70%~80% of the enterprises in the methanol downstream sector have reduced operations or shut down, resulting in a noticeable drop in demand for methanol. 　　“The MTO industry accounts for 53% of total methanol consumption, but currently the operating rates of most MTO plants have dropped by 20%~40%, with some plants even having stopped production. ”Cui Zhiming said. 　　According to Xue Fei, at present, many enterprises in the downstream areas of East China, which are the largest methanol consumers in the country, have reduced or halted their production. For example, the 300,000-ton/year MTO unit of Nanjing Huisheng New Materials Co., Ltd. is operating at 80% capacity; the 400,000-ton/year DMTO unit of Shandong Shenda Chemical Co., Ltd. is operating at 70% capacity; the 300,000-ton/year MTO unit of Shandong Yangmei Hengtong Chemical Co., Ltd. was shut down on February 9th; the 600,000-ton/year DMTO unit of Ningbo Fude Energy Company is scheduled to be shut down on February 17th; the 690,000-ton/year DMTO unit of Zhejiang Xingxing New Energy Technology Co., Ltd. is planned to be shut down by the end of February. Since these units all use externally sourced methanol as raw material, load reduction and shutdowns directly affect the demand for methanol. 　　From the perspective of traditional demand sectors, enterprises in the formaldehyde industry have not resumed operations, resulting in a sluggish market for formaldehyde. The overall operating rate of acetic acid manufacturers is low; due to restrictions on road transportation, some companies have accumulated inventory, and with little improvement in demand, sales pressure has increased, leading to a generally slow market trend. 　　Furthermore, according to Zhang Erhong, secretary-general of the Methanol Era Alliance, demand for methanol fuel has also declined significantly due to the closure of restaurants, hotels, and canteens. Over 80% of small and medium-sized enterprises that supply methanol fuel have ceased operations, with some facing bankruptcy. 　　“Affected by factors such as restricted logistics and delays in resuming operations, there has been a reduction in supply at both the upstream and downstream ends of the methanol industry; however, the decline in demand on the downstream side is more pronounced. It is expected that the methanol market will continue to experience modest declines in the short term. ”Xue Fei said.