Methanol pressured by increasing supply and weak demand

China methanol price hit its high point in mid-Mar, but has been moving down since then. The decline in methanol price was firstly and primarily attributed to weaker demand. In Apr, global demand was expected to reduce, hit by the spread of variant Omicron. From end-Apr to May, methanol demand in East China ebbed due to MTO plants cutting operating rates or shutting for maintenance.

Secondly, China port inventory of methanol hovered high. In Apr, about 1.1 million tons of methanol cargoes were reported to have arrived, a high level throughout the year. In May, the large amount of imports were expected to be little changed. As a result, the port inventory at reserve areas is expected to keep rising. With persistent increasing inventory coupled with weak demand, methanol price declined in tandem. As of May 19, methanol port inventory rose 63.4kt week on week to 909.8kt in East and South China, including 518.5kt in Jiangsu, 228kt in Zhejiang, 95.8kt in Guangdong and 67.5kt in Fujian.

Thirdly, China methanol supply was expected to increase. The operating rate of China domestic methanol plants rebounded in late May. There were 10 methanol plants getting restarted in May, with combined capacity of 5.3 million mt/yr. In Jun, with the completion of spring turnaround season, plant maintenance was limited. China methanol market would be under more pressure with the expectation of rising supply.

As for methanol, there could be positive support if Tianjin Bohua’s MTO plant starts as scheduled in 2022. In addition, some standalone MTO plants in East China could raise operating rates.

On May 18, rumors said that a fire broke out at Nanjing Chengzhi’s MTO plant, and then methanol price declined drastically that day. Though the rumor was later proven false, it reflected that demand side was the driving force to methanol market. Only if the demand improves, methanol market then could get rid of the weakness.