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Methanol Market Overview (20200827-20200902) Author/Source: Longzhong Information Date: 2020-09-07 Clicks: 130 (I) Key Points of This Week 1. The methanol market saw a significant rise this week, with transaction prices increasing by 40–140 yuan per ton on average. In port areas, driven by the strong trend in futures prices, spot prices also rose slightly. In inland areas such as Shaanxi and Inner Mongolia, upstream enterprises are seeing decent sales; some have stopped selling their products, and their profit and loss situations have improved, with manufacturers maintaining a positive attitude. 2. The overall operating rate of coal-based olefins remains high. The methanol plant at Yan’an Energy Chemicals, owned by Shaanxi Yanchang Petroleum, experienced a temporary shutdown, resulting in some of the methanol needing to be purchased from external sources; this continues to support a positive market sentiment. The 100,000-ton MTP plant in Daze, Shandong, has plans to restart in September; its restart status deserves attention ； Anhui Huayi’s 500,000 tons per year acetic acid plant was shut down for maintenance on the evening of August 31, with the maintenance period lasting 15 days. 3. As of August 26, the total inventory at ports was 1.2697 million tons, an increase of 0.82% on a month-on-month basis. Port inventories of methanol continued to rise slightly, with both the East China and South China regions showing an increase in inventory levels this week. The inventory of sample enterprises in inland areas was 508,800 tons, up 1.97% on a month-on-month basis. Although methanol inventory in the domestic market has increased slightly recently, the overall inventory pressure on enterprises remains low. Coupled with strong freight rates, traders’ willingness to buy at higher prices has boosted market sentiment. 4. Imports reached record levels in July, declined slightly on a month-on-month basis in August, and are estimated to be between 1 million and 1.05 million tons in September; imports will remain above the 1-million-ton mark. (II) Regarding methanol prices: 1. Methanol prices this week; 6. Overview of the domestic methanol market this week: Northwest region – Methanol prices rose in this week’s market in the Northwest, with overall active trading activity. The 1.2 million tons per year natural gas-to-methanol plant at YanNengHua in the Shaanxi-Mongolia region remains under maintenance; imports remain at a relatively high level throughout the week. Upstream manufacturers are firm in their stance and push prices upward, with some even stopping sales. The 600,000 tons per year methanol plant in Huating, Gansu Province, in the Guanzhong region is undergoing scheduled maintenance; as a result, the supply situation is relatively relaxed. Major manufacturers have raised their prices on two or three occasions, and traders are actively buying up supplies. The upstream sector maintains a balance between production and consumption, with little pressure on inventory levels. The 600,000 tons per year methanol plant in Qinghai has completed its scheduled maintenance ahead of schedule; it is currently operating at reduced capacity. Prices in Xinjiang have seen a slight increase, and the cost of delivering goods from Xinjiang and Qinghai to Ningxia is approximately 1,340 yuan per ton, including taxes. Currently, the bullish sentiment in the northwestern region is strong. Several upstream facilities in Inner Mongolia, such as Donghua, are expected to undergo maintenance in the coming period, so the short-term market trend is likely to remain strong. North China: Methanol prices in North China continued to rise today. In southern Shandong, prices rose by 60-80 yuan per ton; futures prices drove up prices, and the optimism of industry players was boosted, leading to a tendency to buy at higher prices ； The market in central Shandong rose by 40 yuan per ton; trading activity was moderate, with some reluctance on the part of sellers to sell ； In Linfen and Jincheng in Shanxi province, prices have risen by another 20 yuan per ton; companies are able to sell their products smoothly, but there is not much supply available in these areas at present ； In the Hebei region, the price increased by 30 yuan per ton. The sales situation for local manufacturers is decent, and most traders prefer to buy when prices rise rather than when they fall. Longzhong Information predicts that the methanol market in North China is likely to see further price increases tomorrow. Central China: This week, the methanol market in Central China saw a significant overall rise; production activities remained stable, and buying interest was relatively strong. Quotations in the Henan market have risen; companies have increased their ex-factory prices. Sales are performing well, with a large volume of goods awaiting shipment, and there is no inventory pressure at present. The market price has increased by around 100–130 yuan per ton compared to last week. The markets in the Two Lakes region have seen a significant rise. Due to a sharp decrease in supplies coming from other areas, combined with stable demand at the downstream end, limited supply available for trading in these markets, and favorable external factors, transaction prices there have continued to climb, rising by around 200 yuan per ton compared to last week. Overall, driven by positive factors, the market has moved upward as a whole; manufacturers and traders have been pushing prices up, but the rise has been too rapid, and the downstream sector needs some time to adjust to it. At present, there is still a generally optimistic attitude regarding the future of the market. Southwest: The methanol market in the Southwest saw an overall rise this week. In terms of the factory prices set by enterprises, the prices in Sichuan and Chongqing have increased by 30–50 yuan per ton, reaching 1500–1600 yuan per ton ； The price in Yunnan and Guizhou increased by 30–70 yuan per ton, reaching 1570–1820 yuan per ton; however, some companies that ship goods to Sichuan reduced the price by 30 yuan per ton. Prices of Xinjiang-origin goods rose during the first half of the week, and the main methanol production facilities in Qinghai were shut down due to failures in the second half of the week; companies in Sichuan maintained their prices and limited supply, which contributed to an upward trend in prices. However, as the key downstream industries in Sichuan had not yet recovered, the increase in market transactions was limited ； The loading progress in Chongqing during the week was satisfactory, and the Three Gorges locks were opened on the 27th, prompting companies to accelerate their efforts ； Supported by steady port prices and relatively limited shipping schedules in the Guangxi region, the upward price pressure remains strong; however, with the expectation that some facilities in Yunnan will resume operations at the beginning of September, some parties are adopting a more cautious attitude. East China: This week, the methanol market in East China saw increases followed by slight declines, with overall price levels rising significantly. Due to the ongoing shortage of available supply, spot prices in Taicang continue to rise, and it is difficult for these prices to decline even as futures prices fall. This week, many holders sold their positions to realize profits, resulting in strong trading volume across the market. Changzhou and Zhangjiagang fall short of Taicang; due to the price advantage offered by domestically produced products, sales volume is somewhat low. Port inventories increased slightly this week, while negotiations in US dollars rose significantly as expected. South China: The methanol market in South China has shown a trend of strength with fluctuations this week. Due to the delayed arrival of imported cargo ships, the volume of imported methanol arriving in South China during the week was limited, with supply concentrated in certain areas. As the prices of goods in this trading cycle rose sharply, spot prices in South China followed suit. Some suppliers took the opportunity to lock in prices, further fueling the trend of investors chasing higher prices in the market. However, faced with the rapid increase in prices in South China, end-users were reluctant to pay high prices and showed little interest in making purchases; they opted to buy only as needed while remaining cautious. In the second half of the week, the upward trend in futures slowed down, entering a phase of volatile consolidation; demand for spot goods in South China weakened, with average trading volumes. (III) Methanol supply: 1. Statistics on plant maintenance and production cuts This week, domestic methanol producers manufactured 1.3539 million tons of methanol, a decrease of 37,100 tons compared to the previous week, with plant operation rates at 70.74%. New parking facilities were added this week, such as Shenhua Ningmei, Anhui Huayi, and Gansu Huating ； There are no new production cuts this week ； Meanwhile, this week some of the plants that had previously suspended operations or reduced production resumed activity, including those in Fenghuang, Shenhua Ningmei, Inner Mongolia Shilin, Shanxi Wansinda, Qinghai Zhonghao, and certain plants in Shaanxi. This week, the overall loss rate was slightly higher than the recovery rate; consequently, the utilization rate saw a marginal decline this week. Profit 4. Inventory and order levels of manufacturing enterprises As of Wednesday this week (September 2 at 14:00), the inventory levels of some representative methanol manufacturers in the inland areas were approximately 508,800 tons (508,800 metric tons), an increase of 9,830 tons (9,830 metric tons) compared to the previous reporting date, representing a growth rate of 1.96% ； The volume of corporate orders is estimated at 307,300 tons (307,300 metric tons), an increase of 52,450 tons (52,450 metric tons) compared to the previous reporting date, representing a growth rate of 20.56%. During the week, inventory levels increased to varying degrees in the northwest, east China (including Shandong) and north China regions, but sales improved in central China, southwest China and the northeast region, leading to a decline in inventory. 5. Port inventory trends: As of September 2, port inventory of methanol increased slightly this week, with increases observed in both the East China and South China regions. During the week, the unloading of cargo from ships in Jiangsu Province proceeded relatively normally; the volume of cargo picked up in Taicang continued to improve compared to previous periods, with some of the cargo being sent to Nanjing ； In the Zhejiang region, olefins mainly arrive by ship, with some also traded via vessels, which is sufficient to meet local demand. In South China, both domestic and imported goods arrive in large quantities, with local retailers purchasing based on demand. (IV) Demand side 1. Overview of methanol downstream products: http://img.yf116.cn/image/img/20200907/172156133551.jpg http://img.yf116.cn/image/img/20200907/172556137567.jpg 2. Downstream – MTO/MTP/CTO. In terms of supply: 1) There are limited planned maintenance activities for methanol producers in September, so the operating rate of these companies will remain high ； 2) Although methanol inventory in the domestic market has increased slightly in recent times, the overall pressure remains low; coupled with strong freight rates, traders’ optimism about rising prices has boosted market sentiment ； 3) Production at most international methanol plants remains stable, and imports are expected to remain high in September. On the demand side: 1) Most methanol-to-olefins manufacturers are operating at healthy profit levels, with production levels remaining high ； 2) Due to factors such as environmental regulations, the market for formaldehyde is not performing well, and demand is likely to continue declining in the future ； 3) With port prices remaining high recently, arbitrage opportunities from the mainland to sales areas have opened up. Prediction: Currently, upstream companies are seeing smooth shipments overall. Against a generally strong market trend, some companies in inland areas have stopped selling their products, while the number of pending orders in the northwest region is rising rapidly; manufacturers are inclined to maintain high prices. Optimism in the market remains, and Longzhong expects that the methanol market will likely **continue to operate well in the short term, with prices rising further in some areas.