Methanol market kicks off Lunar New Year with resilience

On the first trading day of the lunar new year, China's methanol futures market saw a strong start, breaking the previous weak trend and significantly boosting market sentiment.

In the spot market, trading activity was vibrant, with sellers showing a strong willingness to sell at higher prices. For February delivery, discussion was at May futures contract -20yuan/mt, while for March delivery, it was at +7yuan/mt, with prices increasing by 70yuan/mt.

From the supply side, China methanol plants operated steadily during the Lunar New Year holiday, with operating rates remaining at a high level of around 83%, showing little fluctuation. Regarding spring maintenance, it is still too early, with large-scale overhauls expected to begin only after mid-March. Additionally, in recent years, maintenance activities have become more fragmented, resulting in smoother operating rate trend.

On the port front, arrivals during the holiday were relatively slow. As of February 24, the cumulative arrivals for the month stood at approximately 580,000 tons, with total monthly arrivals expected to be around 700,000 tons. March arrivals are still projected to remain at low levels, leading to a decline in port inventories from the highs.

On the demand side, the olefins sector was influenced by geopolitical factors during the holiday, with prices driven up by stronger crude oil. The profitability of coal-to-olefins production improved. Several coastal methanol-to-olefin (MTO) units that rely on external methanol purchases remained shut down, with their restart timelines yet to be determined. Overall demand for methanol held steady in the short term. In traditional downstream sectors, as post-holiday resumption of work and production progressed, operating rates gradually increased, leading to a recovery in demand.

Additionally, during the holiday, the situation between Iran and the United States remained characterized by a mix of negotiations and standoffs. Future developments could continue to create periodic fluctuations in methanol prices.

Overall, the supply-demand structure of the methanol market is gradually improving. Lower port arrivals, the steady recovery of downstream operations, and the boost in sentiment driven by geopolitical factors are all contributing factors.

In the short term, the market is likely to maintain a relatively strong trend. Moving forward, attention should be paid to the pace of spring maintenance implementation, changes in port inventory levels, and the impact of developments in the Iran-U.S. situation on the market.