Methanol corrects amid high inventory but the pressure may relieve

With the approaching of Mid-Autumn Festival and National Day holiday beginning from end-Sep, stocking demand from downstream plants is weakening. China methanol prices in interior regions pare earlier gains, as methanol inventory at downstream plants is increasing in North Shandong and Yulin Energy and Chemical suspends the procurement of methanol. However, downward space for methanol price is limited, as product inventory has decreased to low after good sales earlier. In addition, China reduces coal supply to stabilize the price, supportive to methanol. Therefore, downward correction in methanol price would be limited in the near term.

On supply front, tank inventory of methanol at coastal regions has increased to record high, and inland methanol market is under increasing pressure as plant operating rate has risen to 72% and supply may further increase with some plants, including Shilin Chemical, Ningxia Hening, and Xinjiang Xinlianxin restarting.

On Demand side, as Sierbang and Zhejiang Xingxing have restarted their MTO plants in East China, the average operating rate of CTO/MTO plants has risen to nearly 90%. Acetic acid price has been hiking persistently, and the average plant operating rate has risen to 85%. However, other downstream sectors such as formaldehyde and DME are lackluster, with plant operations restricted by sluggish demand.

In terms of coal, after the rise earlier, coal price is in the lack of advancing momentum. Mine-mouth coal price dropped by 10-30yuan/mt on Sep 25, as demand softened and stocking demand diminished. However, as safety inspection is strict prior to the holiday, some coal mines are still under shutdown. And some mines, which have already achieved this month's sales target, shut production. Therefore, coal price is expected to consolidate toward the end of the month, and unlikely to slump amid expectation of stocking demand for winter.

In the fourth quarter, some methanol plants in Henan and Shaanxi may shut due to losses with coal price on the high side, some would undergo maintenance and some would be affected by gas restrictions in winter. Meanwhile, MTO plant operating rate hovers high, and Tianjin Bohua may restart its MTO plant after the maintenance. In addition, the slow pace of shipments from Iran could lead to port inventory reduction at East China. Therefore, methanol market could get supported in the longer run.