China coastal methanol market supported by tight supply after holiday

China coastal methanol price strengthened to 2,650-2,660yuan/mt in Eastern region with spot to futures spread widening to 135-140yuan/mt on the first trading day after Chinese New Year holiday. In interior regions, the market was in the lack of advancing momentum with price at 2,000yuan/mt in Inner Mongolia. The arbitrage window for methanol traded from interior regions to coastal regions opened with price spread widening to above 600yuan/mt.

With natural gas-based methanol plants resuming production in China, the average plant operating rate hiked to 75%, and therefore, inland methanol market was relatively weak. Domestic producers showed intentions to outlet products, while downstream buyers adopted wait-and-see approach. In addition, the upcoming cold wave would affect logistics.

As of Feb 18, methanol cargoes discharged at mainstream ports reached 630,000 tons month-to-date, and the import volume is estimated at around 1,000,000 tons in Feb. Tank inventory at the ports is expected to increase by 71.5kt from the level before the holiday, to 988kt this week.

In terms of plant operations in Iran, apart from ZPC's one line, and plants of KPC, FPC and Bushehr, other Iranian plants are still under shutdown, and therefore, shipments to China would be limited in Feb. In other regions, Trinidad and Tobago's CGCL, US Koch and Fairway also began maintenance in Feb, leading to reduced supply for US and European markets.

China methanol imports are expected to keep on the low side in Mar, and the supply in coastal market is likely to stay tight. Whether the gas restrictions in Iran could continue affecting methanol plants should be watched closely.

In terms of downstream, with methanol price rising, PP to methanol processing spread has been squeezed to negative territory. As a result, Ningbo Fund and Nanjing Chengzhi are more likely to conduct maintenance on MTO plants in Mar.

China methanol inventory may decrease in Mar, and therefore, the traditional spring turnaround season for methanol plants may begin later this year.

In a conclusion, with methanol cargoes arriving at coastal market staying low in Feb and Mar, the market would get supported by tight supply.