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Industry Weekly Report – Methanol (20200716–20200722) Author/Source: Modern Coal Chemical Industry Date: 2020-07-27 Page views: 98 (1) This week’s outlook 1. Supply side: This week (20200717–0723), the average operating rate of domestic methanol production facilities was 65.44%. This week, new parking facilities have been added, such as in Mingshui, Shandong, and Shaanxi Coal and Chemical Industry ； There are no new production cuts this week ； Meanwhile, this week some facilities that had been shut down or reduced production earlier have resumed operations, including those in Heilongjiang’s Baotailong, Inner Mongolia’s Guotai, Ningxia’s Hening, Shaanxi Coal Chemical, as well as certain facilities in Henan, Yunnan, and Shandong. This week, the overall recovery rate exceeded the loss rate; consequently, the operating rate saw a significant increase. 2. In terms of inventory: The total inventory at ports this week was 1.3186 million tons (an increase due to the Guangxi region), representing a 2.51% rise on a week-on-week basis. Port inventories continued to rise; during the week, approximately 147,000 tons of imported goods arrived in the Jiangsu region, with most of them coming from Taizhou, Changzhou and other areas. The rate at which goods were taken from the main storage areas improved slightly compared to last week, but it was still not sufficient to absorb the high volume of imports. In the Zhejiang region, slow unloading speeds and delays in the arrival of some shipments meant that there was only a slight reduction in inventories during the week, while olefin consumption remained stable ； In the South China region, the arrival of shipments and pickups from major warehouses remain relatively stable, with little fluctuation in inventory levels. This week, the inventory levels of companies in the mainland were 523,600 tons, representing a 3.56% increase on a week-on-week basis. Inventory levels among these companies had been declining since the end of May, but this week saw an increase in inventory for the first time. 3. In terms of demand: The overall operating rate of coal-based olefins this Thursday was 71.99%, a decrease of 0.03% on a week-on-week basis. Currently, the plant at Jiangsu Sierbang is still under maintenance. Next week, Zhongyuan Ethylene is scheduled to undergo planned shutdowns for maintenance ； In the traditional downstream sector, the operating rates of acetic acid and MTBE rose month-on-month. Facilities operated by various acetic acid producers returned to normal, resulting in a significant month-on-month increase of 9.21%. Meanwhile, the operating rate of chloride products continued to decline month-on-month, with a weekly drop of 11.54%, primarily due to reduced output at facilities owned by Jinling Dongying, Luxi, and Dongyue. 4. Profit-wise: Affected by the decline in methanol prices, profits of coal-based and natural gas-based methanol producers decreased this week, with an increasing number of companies posting losses ； Profits for downstream dimethyl ether and MTBE have risen. For MTBE, both the increase in its own product prices and the decline in raw material costs have contributed to improved corporate profitability. Price increase factors: 1) Growing market confidence in economic recovery; crude oil and thermal coal prices are showing a steady upward trend, providing favorable support on the cost side ； 2) Temporary shutdowns for maintenance at some overseas facilities have led to higher prices in the external market. Price-depressing factors: 1) Port inventories continue to rise; they have now reached a high level of 1.3 million tons. High inventory levels will put downward pressure on methanol prices ； 2) The peak period for maintenance of domestic methanol plants has passed; subsequently, some plants are expected to resume operations, leading to an anticipated increase in overall supply ； 3) Demand for methanol in downstream industries is declining. Zhongyuan Ethylene has plans to shut down its operations at the end of the month, and Sierbang is still shut down. Floods have occurred in various parts of the country, resulting in widespread shutdowns of formaldehyde production plants in the south. It is predicted that there will be many negative factors in the domestic methanol market this week, leading to a decline in prices ； Later in the week, port inventories rose once again, intensifying the bearish sentiment in the market. Overall, buying interest remained weak; in the short term, high port inventories will continue to put downward pressure on methanol prices ； On the demand side, maintenance activities at downstream olefin manufacturers, along with the impact of heavy rainfall that led to reduced operations in industries that use formaldehyde as a raw material, limited the growth in demand for methanol. Overall, the pressure on market supply and demand remains significant. However, since methanol prices are currently below production costs, its market value is undervalued. As a result, some downstream users and traders have become more willing to make purchases. It is expected that next week’s market trend will be characterized by fluctuations. Overview of the domestic methanol market this week: East China: This week, the methanol market in East China showed a slightly weak trend initially, but then stabilized. In the latter half of last week, due to the shutdown of major olefin plants in the Lianyungang area and the gradual resumption of maintenance activities at plants in inland regions, prices on the futures market fluctuated downward. Meanwhile, spot prices remained relatively firm, gradually narrowing the gap between spot and futures prices. Currently, liquidity at ports is somewhat tight; most transactions for distant months involve swaps. Within the week, the basis widened slightly. Throughout the month, there will likely still be some demand for purchasing methanol at lower price levels ； In areas outside Taicang, such as Changzhou and Zhangjiagang, price trends remain generally stable but slightly weak. Lower-priced domestic supplies hold a slight advantage; some quotes for deliveries to the Changzhou area are around 1,610–1,650 yuan per ton. The pace of shipments from ports has also slowed down. South China: This week, the methanol market in South China remained firm. Although futures prices remained weak during the week, the strong fundamentals in South China continued to keep spot prices high. Starting in mid-July, the main ports in South China experienced a period of heavy arrivals of liquefied products. This week, the port berths were heavily occupied, with ships lining up frequently; although there were plans for methanol deliveries, these could not be reflected in actual inventory levels. Some ships had to change ports temporarily to avoid the risk of being stranded at port. Currently, the available supply of spot goods in the South China storage area is limited, and the replenishment of shipments by ships is slow. As the end of the month approaches, there are clear signs of a squeeze in the market. Northwest: The methanol market in the Northwest showed an overall downward trend this week, with a somewhat sluggish trading atmosphere. The methanol plant of Yulin Yankuang in the Shaanxi-Mongolia region is currently in the restart phase; production is expected to resume around July 26, with an increase in supply anticipated. Downstream users and traders showed weak willingness to purchase during the week, and suppliers offered slight price reductions under selling pressure. Sales of lower-grade products were satisfactory in the second half of the week, while sales of higher-grade products were average. The 600,000-ton methanol plant in Changwu, Guanzhong region, shut down temporarily; major factories such as those in Baoji saw an improvement in sales after reducing prices twice within the same week, while sales at other factories were average, with local sales being the main source of revenue. The maintenance of the 300,000 tons per year methanol plants in Ningxia and Ning has been completed; Ningmei continues to purchase raw materials from external sources at normal levels. The 1.2 million tons per year plant operated by Guanghui is still under maintenance, resulting in limited supply of materials from outside Xinjiang. Currently, prices in most areas of the northwest have reached new annual lows. Due to pressure from upstream costs, there is limited room for further declines; however, demand from downstream markets has not shown any significant improvement. As a result, industry players are cautious and prefer to wait and see. North China: Maintenance work at upstream facilities in the northwest is gradually resuming, while the restart of Sierbang facilities downstream has been delayed. In addition, inventory levels at upstream enterprises and in ports are rising, leading to a decline in the methanol market in North China. Affected by the subsidence in regions such as the Northwest and Shandong, local factories in areas like Shanxi and Hebei have taken measures to lower their prices ； The shipment volume of upstream enterprises in Shandong is average, while downstream enterprises in southern and northern Shandong mostly make purchases based on their needs. According to Longzhong Information, the price of methanol in northern Shandong dropped from 1,515 yuan per ton to 1,490 yuan per ton, a decrease of 1.65%. Central China: The methanol market in Central China declined overall this week. The key enterprises in Henan are focusing on fulfilling existing orders; their inventory levels are low, and they maintain firm pricing for their products. Traders are actively seeking out low-cost supplies from nearby areas, but the reduced activity on the downstream side has resulted in unsatisfactory transaction volumes in the market. Business operations in Hubei remain stable, but due to the impact of low-priced supplies from surrounding areas, companies have significantly reduced their quotes. The downstream market is operating at a low level, with cautious purchasing behavior. Overall, due to an increase in domestic supply recently and a decline in demand from downstream markets, companies have lowered their quotes under inventory pressure, and the market in Central China has also seen a significant decline. Southwest: This week, the methanol market in the southwest saw weak fluctuations, with prices varying from place to place and showing slight differences. In terms of the factory prices set by these enterprises, those in Sichuan and Chongqing have been reduced by 20–70 yuan per ton, to 1440–1520 yuan per ton ； In Yunnan and Guizhou, the price ranges from 1,560 to 1,670 yuan per ton, fluctuating around 30-50 yuan per ton. In terms of market transactions, Chengdu and Chongqing saw their prices drop by 20-30 yuan per ton, following the decline in upstream prices, to around 1620-1650 yuan per ton ； In Guangxi, the price is 1,750 yuan per ton, driven mainly by steady port prices and temporary shortages of imported goods in the region. During the week, downstream buyers maintained their steady purchasing pace; moreover, the suspension of operations by key downstream manufacturers in Sichuan heightened a cautious attitude among buyers. Upstream suppliers adjusted prices slightly downward in an attempt to boost sales, but demand remained relatively weak due to pessimistic expectations regarding future supply increases. 3. Weekly review of downstream products this week: Formaldehyde: The domestic formaldehyde market remained stable overall this week, with prices declining in some areas. Within the week, domestic raw material prices showed a slight downward trend, with limited support from cost factors. The Shandong region is under the oversight of central environmental protection authorities. Coupled with increased rainfall in this area this week, timber processing operations downstream have been reduced to around 30% as a result, leading to weak demand for formaldehyde; local formaldehyde manufacturers are struggling to continue operating ； Affected by the high water levels of the Yangtze River, timber processing plants in Anhui and Jiujiang, Jiangxi have been forced to shut down on a large scale, resulting in continued weak demand for formaldehyde; local formaldehyde manufacturers are managing to maintain operations at a modest level ； In Henan and Hebei provinces, terminal demand remained decent in the early stage, which kept prices at enterprises in these areas at reasonable levels. However, this week marked the onset of the traditional off-season for local terminal factories; coupled with environmental regulations and increased rainfall, demand for formaldehyde dropped sharply. As a result, local formaldehyde manufacturers reduced their prices in an attempt to stimulate the market, yet demand for this product did not improve. Overall, domestic formaldehyde manufacturers and the timber market are in their traditional off-season; there is continued weak support from end-users, resulting in persistent low demand for formaldehyde. The impact on demand outweighs that of factors related to raw materials. MTBE: The MTBE market saw fluctuations this week, with prices rising slightly by 30–50 yuan per ton compared to last week. After prices rose to high levels last week, as the new purchasing period came to an end, sellers reduced their shipments, and coupled with negative factors from external markets, the market entered a downward trend. However, as prices dropped again to low levels, this attracted some downstream retailers to restock at lower prices. Coupled with rising prices for both gasoline and crude oil, MTBE manufacturers seized the opportunity to push up prices, and the Shandong region once again led the market into a new round of price increases. The Northeast and North China regions followed suit with upward trends. In the MERCOSUR region, transportation within the area is restricted due to the recent rainy season. Additionally, as export activities by the key companies are limited in the second half of the month, market demand remains weak, making it difficult for prices to rise; therefore, a strategy of maintaining stable levels is preferred. Dimethyl ether: This week, the overall market for dimethyl ether has shown mixed trends, with moderate demand from downstream users. At the beginning of the week, end-user companies began to enter the market for purchases, but they adopted a cautious approach due to market sentiment; as a result, prices remained low across all manufacturers, and production and consumption were roughly in balance. In the later period, the price of raw material methanol declined slightly, while the price of dimethyl ether remained stable. The sales performance of various manufacturers improved to some extent, and the market began to show signs of recovery. In the Henan region, prices saw a noticeable increase as companies raised them this week; there are no positive developments in the southwest region. Both Lutianhua and Longqiao stated that they will decide on the timing of production based on market conditions. Longzhong Information believes that this week, terminal liquefied gas prices have seen several slight increases driven by rising crude oil prices. However, in terms of short-term market movements, there is insufficient momentum for further price increases; overall, prices will remain relatively stable. Methane chlorides: This week, the domestic dichloromethane market saw regional adjustments, with prices rising in the Shandong region, while prices in East and South China remained relatively stable. This week, the operating load of the Jinling Dongying plant in Shandong region dropped to 50%, that of the Dawang plant to 70%, and that of the Dongyue plant to 60%. The load in Luxi also dropped to 50%, and domestic sales there are limited, resulting in a limited supply within the region. Furthermore, the price of liquid chlorine as a raw material remains high, putting pressure on the costs of manufacturers, which in turn leads to higher quoted prices. At the beginning of the price increase, some downstream users and traders made appropriate purchases, so manufacturing companies faced little inventory pressure. But as prices rose to high levels, trading volume declined. There are no significant changes in the supply situation in East China and South China; due to factors such as price increases in Shandong and inverted cost structures, manufacturers are offering relatively stable prices. However, key downstream refrigerants such as R32 have entered the traditional off-season for demand, resulting in weak demand conditions; purchases are limited to those that are essential. As a result of the balance between supply and demand, the markets in East China and South China have reached a stalemate. Acetic acid: This week, the domestic acetic acid market saw a bullish sentiment. Recently, the plants of various manufacturers have returned to normal operation, and market supply has gradually increased, alleviating the shortage in supply. As a result, manufacturers are mainly focusing on stable shipments at their quoted prices. With this continuous stability, some traders are offering slightly lower prices during price negotiations, leading to a generally stable but slightly weak market atmosphere. Amid the bearish sentiment in the market, acetic acid manufacturers collectively raised their quotes, which in turn drove up market transaction prices. However, downstream factories faced significant pressure due to the high costs of acetic acid, and continued to rely mainly on contracted supplies; spot transactions were concentrated at lower price levels. The supply in the South China market has been tight recently, keeping supplier quotes at high levels. However, new shipments arriving at the ports this Thursday will help alleviate the supply shortage, and given the limited demand from downstream industries, the market trend remains weak on a stable note. Manufacturers are about to begin a new round of contract deliveries, which has led to a slight shortage in market supply. However, there is significant pressure on costs on the downstream side, and there is resistance to high prices for acetic acid; as a result, demand is focused on fulfilling existing contract orders. No clear shortage in supply has emerged in the market, and the positive factors supporting price increases are relatively limited. It is expected that prices of acetic acid in East China and North China will see only modest increases next week. Demand in the South China market is limited; two shipments of goods are set to arrive at the port by the end of the month, resulting in a passive surplus in market supply and an obviously weak trend.