Thread Content
Methanol (20200709-20200715) Market Trends Author/Source: Longzhong Information Date: 2020-07-20 Clicks: 223 (I) Weekly Outlook 1. Supply side: This week (20200710-0716), the average operating rate of domestic methanol production facilities was 60.46%. During the week, multiple units in Henan were shut down for maintenance, while there were also units that were shut down in Xinjiang ； In Yunnan, several pre-existing production-cutting facilities continued to reduce output after briefly resuming operations this week ； Meanwhile, some of the facilities that had been shut down earlier this week have resumed operations, such as Shaanxi Black Cat, Hebei Huafeng, and Zhongyuan Dahuahua. This week, the overall loss rate remained higher than the recovery rate, resulting in a slight decline in the operating rate this week. 2. In terms of inventory: The total inventory at ports this week was 1.2863 million tons (an increase due to the Guangxi region), representing a 5.67% rise on a week-on-week basis. Port inventories have increased significantly, with the concentration in the East China region. Jiangsu saw a total of 131,600 tons of imports arrive, but due to rising prices recently, downstream buyers are being more cautious about purchasing at higher prices; thus, the rate of stock removal from major storage areas is not fast. Ships carrying goods have also arrived in Zhejiang, resulting in a roughly balanced supply and demand situation. In South China, particularly in Fujian, there were relatively many ships arriving, with an increase in shipments coming from Quanzhou. Under normal demand levels, this has led to a slight increase in inventories as well. This week, the inventory levels of enterprises in the mainland were 505,600 tons, a decrease of 3.97% on a month-on-month basis. Inventory levels among enterprises in the inland areas have been declining since the end of May, with a significant drop in inventory levels among the sampled enterprises. 3. On the demand side: The overall operating rate of coal-based olefins this Thursday was 72.03%, up 0.78% on a week-on-week basis. At present, units such as Zhongtian Hechuang and China Coal Yulin are still under maintenance. The Zhongtian Hechuang unit is expected to resume operation next week, which will lead to an further increase in overall production levels. The remaining units are operating steadily, while the maintenance schedule for Shenhua Xinjiang has been postponed ； In the traditional downstream sector, the operating rates of acetic acid and formaldehyde increased on a month-on-month basis. The acetic acid industry saw a significant rise of 11.76% due to the resumption of production at the facilities of Shaanxi Yanchang and Yangtze River Acetoacetic Acid. On the other hand, the operating rates of chlorides declined by 6.31% on a month-on-month basis as a result of reduced production volumes at Jiangxi Liwen and Shandong Jinling Dawang. 4. In terms of profits: The average profit for coal-based enterprises in Inner Mongolia this week was -221.5 yuan per ton, a decrease of 1.03% on a week-on-week basis and 335.64% lower than the same period last year ； Shandong’s coal-based enterprises are at -238 yuan/ton, up 1.65% on a month-on-month basis and down 3866.7% on a year-on-year basis ； The price for natural gas processing enterprises in the southwest is -92.5 yuan per ton, representing a month-on-month decrease of 12.12% and a year-on-year decrease of 190.24%. Factors driving price increases: 1) There are continued bullish expectations for crude oil and thermal coal in the medium term, which is favorable for the sentiment in the methanol market ； 2) The Nitrogen Fertilizer Association advocated for rotational maintenance plus maintenance of some facilities in Iran overseas, resulting in firm quotes from methanol manufacturers. Factors contributing to price drops: 1) Port inventories have increased again, and high inventory levels will continue to suppress methanol prices ； 2) Some of the maintenance devices from the earlier period have been gradually restarted, and an increase in supply is expected in the near future ； 3) Some downstream companies have high inventory levels, the downstream market lacks the momentum to drive prices up, and the overall trading atmosphere has become weaker. It is predicted that this week, due to concentrated maintenance of domestic production facilities, the operating capacity of enterprises will remain low. At the same time, there are ongoing unexpected shutdowns of overseas facilities, which will continue to drive up the price of methanol in the domestic market ； In the latter part of the week, as port inventories increased again, there was no sign of improvement in the issue of high inventory levels. The market’s tendency to chase rising prices diminished, resulting in overall weak buying interest. Subsequent imports will arrive in relatively concentrated amounts, ensuring an ample supply at the ports; port inventories are expected to remain high ； On the demand side, traditional downstream sectors are gradually recovering, but remain below the levels seen in the same period last year ； Driven by profits, the operating levels of olefin plants remain high overall, leaving little room for further growth. Additionally, high inventory levels among some downstream companies have constrained the growth in demand for methanol. It is expected that the methanol market will see a decline next week. 7. Summary of the domestic methanol market this week: According to a report by Longzhong Information on July 16, in the East China region, the methanol market saw a rapid rise this week. Futures prices rose sharply, breaking through the 1,850 level of resistance, and spot prices also increased significantly, rising by around 80–100 yuan per ton compared to last week. The basis remained stable, but there was limited trading of spot goods at high prices, indicating some weakness in the momentum for further price increases; toward the end of the week, the average price of actual transactions declined slightly ； Regarding paper goods, some restocking is carried out in accordance with contracts and exchange procedures; there are many discussions among arbitrage traders, and the basis remains relatively stable ； The price increase in the Changzhou area is smaller than that in Taicang; goods ownership is relatively concentrated, and the market operates on a market-driven basis. In the Zhangjiagang area, the price gap has widened, with many transactions being based on negotiations, but the volume of transactions remains limited. South China: The methanol market in South China saw overall price increases this week. During the week, the prices of futures contracts rose significantly. Coupled with frequent reports of maintenance work at overseas plants, spot prices in South China saw a strong increase. However, downstream buyers were not very enthusiastic about making purchases and preferred to wait and observe, resulting in relatively stagnant market transactions. In the second half of this week, spot prices gradually weakened, with limited enthusiasm for buying at higher prices. In terms of inventory, there was a slight increase in overall inventory in the South China region this week. Frequent deliveries to Fujian during the week contributed to an increase in the overall inventory there. At present, container capacity in Fujian is limited, so it is possible that goods may be unloaded at another port. Northwest: Methanol prices remained strong in the northwest this week, yet the sales atmosphere was rather stagnant. The plants of Newao, Guotai, and Yulin Yankuang in the Shaanxi-Shengxi region remain under maintenance. The 300,000-ton methanol plant operated by Jinchengtai resumed operations on July 16; thus, there is still some support from the supply side. Factories tend to maintain high prices, but following the concentrated purchasing activity last week, demand from downstream users was insufficient, and the order volume from upstream suppliers was low, resulting in a slight increase in inventory during the week. Most factories in the Guanzhong region are adhering to long-term contracts, and there were few new orders closed this week. The 300,000-ton methanol plant in Ningxia is expected to be restarted around July 20. Due to a shortage of supply in the region, the output is primarily used for local olefin production. Shipments in Xinjiang and Qinghai regions are progressing smoothly; Shenhua Xinjiang is procuring materials beyond its planned quotas, and the overall atmosphere is positive. Currently, macroeconomic factors provide only modest support; traders are bearish, and fatigue is unlikely to ease in the short term. North China: Although macroscopically, crude oil prices were rising and methanol futures were fluctuating at high levels this week, the upstream facility in Henan province, Zhongyuan Dahuahua, resumed operations, while Zhongyuan Ethylene planned maintenance work. As a result, sentiment in the Shanxi market declined, and traders became less eager to stock up. In addition, downstream inventory levels were high in consumption areas such as Shandong, leading to a drop in methanol prices in North China this week. According to Longzhong Information, the price of methanol in northern Shandong dropped from 1,550 yuan per ton to 1,540 yuan per ton, a decrease of 0.65%. At present, as maintenance work in the northwest region gradually resumes and supply increases, there are no significant changes on the demand side; therefore, it is expected that the methanol market in North China will tend to decline next week. Central China: The methanol market in Central China saw a slight increase this week. Although Zhongyuan Dahua started operations this week, as the plant’s load increases, market supply remains low. Meanwhile, rising international crude oil prices and methanol futures at high levels have bolstered market sentiment. Traders have been quite active in making purchases, and enterprises have seen good sales volumes. However, demand from downstream markets has remained limited; negotiations have been rather stagnant, and actual transactions have been few. Overall, this week, driven by positive external factors, methanol producers and holders showed a strong willingness to push up prices. However, the downstream market lacked the ability to follow these price hikes; overall trading activity remained sluggish, thereby hindering any broader upward trend in the market. Southwest: This week, the methanol market in the Southwest saw fluctuations within a certain range, with prices rising and falling in different areas. In terms of the ex-factory prices for these enterprises, prices in Sichuan and Chongqing have seen adjustments ranging from 20 to 50 yuan per ton, while prices in Yunnan and Guizhou have increased by 10 to 70 yuan per ton ； In terms of market transactions, prices in Chengdu and Chongqing decreased by 10–30 yuan per ton, while prices in Guangxi rose by 70 yuan per ton. In the first half of the week, some companies in Sichuan and Chongqing reduced their prices due to pressure from shipments; however, in the second half of the week, supported by rising futures prices, leading companies raised their quotes by 30–40 yuan per ton. Some companies in Yunnan and Guizhou also increased their prices for the second time due to shortages of raw materials. Yet, due to cautious attitudes on the part of downstream buyers, the pace of shipments was slow, and companies were relatively cautious about following through with price increases. 3. Weekly overview of downstream products this week: Formaldehyde: The domestic formaldehyde market remained stable this week. At the beginning of the week, raw material prices showed a clear upward trend, but they gradually weakened as the week progressed. Downstream end-users across the country are largely affected by rainfall and high temperatures, leading to a continued reduction in production activities; as a result, demand for formaldehyde declines, with demand mainly coming from essential uses. Against this backdrop, formaldehyde manufacturers are under pressure; these factories rely mainly on steady end-demand to maintain their shipments. This week, the formaldehyde industry in Shandong province has faced **environmental inspections; the timber industry has been affected by this, and production activities will further decline, resulting in a pessimistic outlook for demand for formaldehyde. Therefore, the commissioning of formaldehyde production facilities in Shandong is increasingly aligned with the trends in terminal demand, putting continued pressure on enterprises’ inventory levels, which remain at relatively high levels. MTBE: The MTBE market saw mixed trends this week, with uneven trading volumes. After prices rose to high levels last week, downstream buyers became less enthusiastic about making purchases. Coupled with additional negative factors from the external market, sellers faced difficulties in selling their goods, forcing them to offer slight price discounts as a promotional measure. In the Shandong region, high prices met with resistance from downstream buyers. In response, merchants offered slight price reductions to facilitate sales. As prices dropped to a low of 3,800 yuan per ton, and gasoline sales improved, downstream buyers took the opportunity to restock. Consequently, major manufacturers in the region recorded sales volumes exceeding 1,000 tons for two consecutive days, indicating a gradual recovery of the market. Crude oil prices have been rising continuously, which is positive for market sentiment; merchants in Shandong region have taken the opportunity to raise prices slightly to gauge market reactions. In the Northeast and North China regions, market demand grew only modestly, leading to a slight decline in prices compared to last week. In the South China region, supply remained limited. Coupled with positive influences from external factors, prices saw a slight increase this week compared to last week. Dimethyl ether: This week, domestic prices of dimethyl ether remained generally stable with a slight upward trend, and the trading situation saw some improvement. Due to the consistently low prices of dimethyl ether in the earlier period, most companies suffered losses, which led some of them to carry out maintenance work. Mainstream enterprises in the Henan production area raised their prices by about 110 yuan per ton this week; some enterprises imposed sales quotas. The trend of price increases is gradually spreading to neighboring provinces and cities. Longzhong Information believes that the price of raw material methanol remains largely stable. At the terminal gas stations, sales have been smooth this week, which provides support for the price of dimethyl ether. Overall, there is a certain price difference between gas and ether; the increase in prices this time may encourage end-users with essential needs to make purchases. However, in the long term, there is insufficient momentum for further price increases, and prices are likely to remain relatively stable. Methane chlorides: This week, the market price of dichloromethane in China showed an upward trend. In Shandong Province, factories faced little supply pressure; goods were shipped to ports in Western Shandong, while domestic sales remained limited. As a result, the overall supply decreased. Producers maintained a bullish outlook and continued to keep prices stable. However, as prices continue to rise, overall demand remains insufficient. During the traditional off-season for demand, this low demand level constitutes a significant negative factor affecting the dichloromethane market. Affected by rainfall, operations in the upstream and downstream sectors in the East China region saw varying degrees of load reduction. The operating rates of manufacturing enterprises in this region declined significantly: Ningbo Juhua’s rate dropped to 60%, Jiangxi Liwen’s to 50%, and the production facilities at Jiuhong also operated intermittently. Overall, there is no notable pressure on the supply side. Meanwhile, driven by price increases in the Shandong region, manufacturers are eager to raise their prices as well. However, there has been no significant improvement in the real demand downstream in the East China region; orders are being placed cautiously, and trading activity in the market remains moderate. There is a strong atmosphere of hesitation in South China, with little change this week. Acetic acid: The domestic acetic acid market this week moved steadily, ending the previous trend of continuous price increases. The manufacturers that carried out maintenance in the earlier period resumed normal operations, and market supply gradually increased. Although there were equipment failures at manufacturers in the northwest during the weekend, the steady operation of major manufacturers in the east ensured a significant rise in market supply, alleviating the tight supply situation in the acetic acid market. As a result, the prices offered by suppliers stabilized. Manufacturing companies primarily deliver production volumes to prior orders; current inventory levels are low. They continue to offer firm prices at high levels. However, traders have sufficient stock in reserve, and amid pessimistic market sentiment in the later period, they actively make offers in an effort to close deals. In the East China market, slightly better discounts can be obtained when purchasing in person and negotiating the price. Facing a generally weak trend in acetic acid prices, downstream manufacturers are primarily fulfilling existing contracts; spot purchases remain limited. With few new deals being concluded in the market, prices have gradually plateaued at high levels.