Supports to recent methanol market in China

1. Natural gas price rise in Iran

Recently, news that Iran is going to increase natural gas price for methanol plants draws much attention. If the price hike is implemented, the economics for methanol plants would get worse and some plants may even suspend production. As a result, China methanol futures moved up in end-Jun and early Jul.

2. Lower-than-expected port inventory

According to China customs data, the country imported 1.3776 million tons of methanol in May, and the imports are expected to approach 1.4 million tons in Jun, reflecting huge amount of imports in recent 5 years. However, the increase in port inventory is slower than expected, supportive to market price.

3. Reduced cargoes to Chinese market

According to the statistics compiled by CCFGroup, as of Jun 29, cargoes loaded in Jun and bounded for China reached only about 800kt that month. Based on the estimation, cargoes to arrive in China would reduce to about 1.05~1.1 million tons in Jul, much lower compared to the level in May and Jun.

4. Coal price stabilizing and rebounding

China coal price is stabilizing and rebounding, with inventory at coastal regions falling back and demand picking up due to higher temperature. Expectation of firm coal price strengthens, due to the likelihood of El Nino this summer and high temperature in Southeast Asia.

In a conclusion, China methanol price is expected to keep firm in Jul, while if the impact from Iran's natural gas price rise quietens, the advancing momentum for methanol may get weaker and the market may turn to consolidation. Methanol market would still be dependent on port inventory as well as coal price in Jul.