Methanol market resilient, but pressure still exists

China methanol price moves up recently in coastal regions. It is mainly attributed to tight supply in Taicang, the most active market in East China, as discharging of cargoes are frequently affected by port closure due to bad weather conditions such as heavy fog and strong wind. As a result, spot methanol to futures price spread has widened to 80~90yuan/mt.

With the decelerating of cargo arrivals, port inventory of methanol reduces in Jan. As of Jan 22, the amount of methanol cargoes discharged at mainstream ports of China has reached 900kt month-to-date, down 150kt from Dec. However, there's about 500kt cargoes floating at sea. If the discharging keeps smooth, methanol cargo arrivals to China would stay at regular or slightly high level in Jan.

In Dec, Iranian-origin methanol cargoes arriving at China reached 850kt, while the volume amounted to 560kt month-to-date and is estimated to reach 890kt by end-Jan. However, non-Iranian origin cargoes are estimated at 370kt in Jan, slightly lower than earlier expected.

In Feb 2024, the cargo arrivals are expected to be at relatively low level, which could be supportive to methanol price.

In terms of plant operations, Iran's ZPC is restarting one 1.65 million mt/yr methanol line, while Kimiaya has postponed the restart due to the low temperature. As for other plants, the gas restriction is coming to an end, and methanol plant operating rate in Iran is expected to rebound from lows. In the US, Natgasoline has shut its methanol plant due to deep freeze, Koch shut its plant temporarily and restarted, with maintenance plan in Feb. Fairway also has plant turnaround plan. Geismer3's new plant is expected to start in end-Jan or Feb, which could offset some supply losses due to plant maintenance.

Cargo arrivals from Iran to China are expected to recover in Mar, as it would take about one month to ship the cargoes to China. In addition, China domestic plant operating rate is anticipated to pick up with supply increasing, as several natural gas-based methanol plants are to restart.

In downstream segments, Zhejiang Xingxing has shut its 690kt/yr MTO plant in early Jan for month-long maintenance. Then, the market could get supported when the plant gets restarted. However, Ningbo Fund and Nanjing Chengzhi Phase II are scheduled to conduct MTO plant maintenance in Mar-Apr, and prior to the period, there will be pressure on methanol price.

In a conclusion, the resilience in methanol price is attributed to tight supply in the near term, coupled with expectation of Zhejiang Xingxing's restart. In the longer run, however, with supply recovering while demand likely to weaken, methanol market will be under strains with inventory expected to rise.