Methanol market dependent on fundamentals and economic resilience

China methanol market is lukewarm recently. On supply front, China domestic methanol plant operations are little changed, with average operating rate around 72%. The operating rate of methanol plants in Central China hovers below 40% amid shutdowns due to poor economics. In North China, supply increases, as plants affected by environmental protection inspection earlier are restarting, and several plants based on coal in Shanxi have restarted. The average operating rate may further rise in end-Nov or early Dec if Ningxia Kunpeng and Ningxia Baofeng start their new plants and achieve stable production.

On demand side, during the slack demand season, downstream plant operating rate could hardly move up. Yangmei Hengtong keeps its 300kt/yr MTO plant running with reduced operating rate, at around 60-70%. Ningbo Fund may shut its 600kt/yr MTO plant this week for maintenance, and Sierbang plans to shut its 800kt/yr MTO plant in Dec for maintenance.

In terms of cost, National Development and Reform Commission stepped up requirements to ensure coal supply. Coal price pulled back in tandem, and its support to methanol price weakened.

The fundamentals of methanol are lackluster, and then another focus is laid on the optimization of the pandemic-related restrictions. After the central government rolls out 20 optimization measures, local governments have adjusted the measures accordingly. In the short term, the uncertainty in pandemic prevention makes market players more cautious. Logistics and demand expectation are affected. For example, the freight from Inner Mongolia to North Shandong remains high, and the logistics restrictions has caused piling up of inventory in inland China. In the longer run, the pandemic is expected to get under control, and then amid economic resilience, methanol market could be propped up.