China methanol sees a rebound, but gains capped

China methanol markets were mixed in the first three months of 2021. In Jan, coastal methanol market dipped slightly, while inland market declined sharply as producers were keen to reduce inventory prior to Lunar New Year holiday. In Feb, both markets strengthened, while in Mar, coastal market moved up before pulling back rapidly but inland market stayed firm before falling in the middle of the month.

In Mar, coastal methanol inventory hovered low, while inventory in inland plants kept decreasing. In the latter half month, however, methanol market pared gains, tracking the slump in international crude oil prices.

Several Chinese domestic methanol plants typically carry out maintenance in spring, hence the name Spring Turnaround Season. In Mar 2021, domestic plants with combined capacity over 5 million mt/yr could be shut for maintenance. The total capacity under maintenance in Mar could reach more than 9 million mt/yr with the plants shut earlier included.

Previously-shut plants due to natural gas restrictions

Methanol plant maintenance in Feb

Methanol plant maintenance in Mar

Due to the requirements to reduce energy and achieve carbon neutrality in Inner Mongolia, some methanol plants brought forward the maintenance plan. For example, Jiutai Energy was earlier slated to shut the 1 million mt/yr methanol plant in Apr together with its MTO unit for maintenance, but had brought the maintenance at methanol plant to Mar 23. Demand for methanol from MTO units increased in Northwest China, leading to drops in methanol plant inventory. In addition, inland methanol price was bolstered by rise in coal price, while coastal methanol price pulled back. In late Mar, Inner Mongolia producers lowered prices, and the offers approached to market prices.

Though methanol supply would contract due to plant maintenance in Mar, there would be plants with combined capacity of about 5 million mt/yr poised to restart by the end of Mar, on a par with the capacity for maintenance in Apr. Hence, domestic methanol supply would not reduce further in Apr, while imports were expected to increase and demand was unlikely to improve notably.

In addition, China Coal Ordos Energy and Chemical has started its new 1 million mt/yr methanol on Mar 24, and is poised to start feeding on Apr 6 and begin MTO-grade methanol production in the first half of Apr to provide feedstock to China Coal Mengda’s MTO plant. Some methanol producers’ contract with China Coal Mengda woule expire in end-Mar, and the contract supply from those producers could reduce. Moreover, Guangxi Huayi is slated to start its 1.8 million mt/yr new methanol plant in mid-Jun, and is expected to start production in early Jul. Its 500kt/yr acetic acid plant would start at the same time, but there would be still a large amount of methanol for sale.

In a conclusion, domestic methanol supply shrinks and the price rebounds with improvements in fundamentals. However, there could be ling-term pressure from plant restarts, and the rebound is capped amid cautious sentiment.