Methanol market affected by MTO plant operations

On Jun 20 morning, news that Zhejiang Xingxing has shut its 600kt/yr MTO plant on Jun 19 evening was confirmed, and the restart is undecided. Methanol Sep futures contract dropped but then rebounded. The market has earlier expected the shutdown of Xingxing's MTO plant, and it has been one of the factors bringing pressure on methanol market. Once the news was confirmed, the impact was limited as it was in line with earlier expectation.

In the near future, the market focus is on the restarts of Luxi Chemical's 300kt/yr MTO plant in Shandong and Sierbang's 800kt/yr MTO plant in Jiangsu. The two plants may restart in end-Jun, but it has not been confirmed.

In terms of economics for MTO plant, it is recovering recently but still hovers around break-even line theoretically. MTO plants may gain profits in the operation, which would be the base for the restarts of the two MTO plants.

In Jan-May 2023, China domestic methanol output reached 31.87 million tons, and the imports reached about 5.31 million tons. Consumption of methanol from MTO/CTO plants was estimated at 17.50 million tons, accounting for 47% of methanol supply. MTO remains the first and foremost downstream application for methanol in China.

Currently, methanol price in interior regions of China is relatively low, and producers are reluctant to sell. In coastal regions, methanol price is relatively strong, on the back of stabilizing of coal price and reduction of supply from Iran. However, methanol inventory is rising, and demand for methanol barely improves, despites drop in methanol price, and any improvement in demand would be dependent on economic resilience. Methanol price is driven by coal, inventory as well as MTO plant operations in the short term.