China methanol market may remain weak after some gains

On the first trading day (Feb 18) after Chinese Lunar New Year festival, chemical painted a rosy picture with prices driven up by robust crude oil and stock market. China methanol futures rose by 3.38% to close at 2,356yuan/mt on Feb 18. Compared to other chemicals such as styrene and MEG, methanol was not so strong.

The market focus is still on changes in port inventory, international plant operations as well as capacity expansion in China after the holiday.

As of the week ending Feb 19, China east and south coastal inventory reached 811.8kt, up 21.6kt from the week ending Feb 4. Port inventory dropped in Zhejiang as some cargoes were delayed, but increased in other regions and is expected to further rise with arrivals of cargoes.

As for overseas plants, methanol plant operating rate declined in the US due to cold weather conditions. The joint venture of Celanese and Mitsui with methanol capacity of 1.5 milion mt/yr, LyondellBasell's 780kt/yr methanol plant, and Methanex' 2 million mt/yr methanol plant were shut. In addition, Natgasoline's 1.75 million mt/yr methanol plant was shut on Feb 3 due to some issue. However, as downstream plant operating rate was low, US methanol price got barely boosted by the plant shutdowns. In Iran, Marjan’s 1.65 million mt/yr methanol plant was restarted, and Kaveh is poised to restart its 2.3 million mt/yr plant in early Mar.

Production from Iran is expected to increase, while China’s downstream sectors enters slack demand season. Operating rates of formaldehyde and DME plants reduced notably during the holiday and acetic acid plant operating rate fell due to plant shutdowns, while MTO operating rate keeps high. However, Nanjing Chengzhi and Zhejiang Xingxing have maintenance plans on their MTO plants.

In a conclusion, China methanol market is expected to remain consolidation, with fundamentals staying weak as overseas supply recovers, domestic capacity expands, demand shrinks and port inventory increases.