Methanol inventory under pandemic-prevention measures

The spread of pandemic in China has dealt a blow on methanol market. Due to the measures to stem the pandemic and logistics restrictions, China top 8 ports’ container throughput declined 5.7% yoy in Apr, vs an increase of 0.7% a month earlier. Foreign trade throughput at the top 8 ports was down 4.1% yoy in Apr compared to an increase of 4.9% in Mar, and domestic trade throughput decreased 9.9% yoy in Apr vs a drop of 11.7% in Mar.

It is undoubted that the impact on container throughput would directly affect China methanol supply and demand.

The chart above shows methanol price trends at Taicang and Changzhou of Jiangsu Province, the most active market in coastal regions.

Jiangsu Province has been in the situation with strict prevention and control measures against the pandemic. Changzhou was locked down once in Mar, and Taicang is still under static management. Since the resurgence of pandemic in Mar, port inventory of methanol has declined notably in Jiangsu. It was attributed to the measures to prevent the pandemic. The discharging of cargoes has been slow in Taicang, and delivery and picking up of goods are dependent on how strict the measures are. In addition, discharging of cargoes was also affected by the bad weather at Yangtze River Estuary earlier.

The pandemic also broke out in Quanzhou, a port in Fujian Province, in late Mar. As the province imposed strict prevention measures, port inventory in Fujian decreased before rising continuously. It was different from the situation in Jiangsu, as the logistics recover faster with the pandemic timely curbed in Quanzhou while the prevention measures persist in Jiangsu.

In a conclusion, methanol inventory at the ports would be greatly affected by how strict the measures to stem the pandemic are imposed and how long the measures will last.

In the early stage of pandemic-prevention, with the circulation of materials slowing down, product inventory at methanol plants would increase and producers could have strong selling intention to lower inventory while demand weakens. As a result, methanol price would fall with inventory rising. Afterwards, with the government stepping up prevention measures, port logistics will be impacted, causing slowdown in cargo discharging and delivery. Port inventory could decrease in tandem. Then, suppliers may consider production cuts and the supply may contract. When the target of “dynamic zero infected case” is achieved, demand would rebound and the price would turn firm. With the market rallying and logistics recovering, methanol inventory may increase again.