China methanol imports affected by Panama Canal restrictions and overseas plant shutdowns

1. Low-water restrictions at Panama Canal

Due to the impact of the El Niño phenomenon, the Panama Pacific coast region has experienced a decrease in precipitation and an increase in temperature since this spring. This has resulted in the decrease of water levels in rivers, lakes, and reservoirs. The prolonged drought has led to a serious water shortage in the Panama Canal. In late July, the Panama Canal Authority (PCA) implemented water conservation measures by reducing the number of vessels allowed to pass through and imposing restrictions on booking time slots from August 8th to August 21st. Additionally, vessels were required to reduce their weight by 40% due to the low water levels. As of August 9th, it was reported that there were 154 vessels waiting to transit the Panama Canal, and the congestion is still worsening. The average transit time through Panama Canal has reached 21 days.

Recent data from reports on shipments indicate that the delay for vessels carrying methanol from Trinidad and Tobago passing through the Panama Canal has increased from 1.5 days to around 4 days (as of July 23rd). According to available data, the total methanol cargoes of Trinidad and Tobago origin, that have arrived at China and been unloaded or are to be unloaded, reach 96kt in Aug, down 159kt from Jul.

2. Shutdowns of methanol plants in Trinidad and Tobago

Woodside has shut one gas field at Trinidad and Tobago since Jul 31 due to technical problem. Due to natural gas supply disruptions, several methanol plants, including Methanex, MHTL, CGCL were affected. MHTL's No. 3, No. 4 and No. 5 methanol lines and CGCL's methanol plant have been shut for 1 week and restarted.

As a result, methanol production from Trinidad and Tobago is expected to reduce, and the volume of methanol cargoes loaded in Aug would decreased. However, due to the congestion at Panama Canal some cargoes could be delayed from Aug to Sep, and therefore, any decline in the cargo arrivals at China in Sep would be limited.

3. Shutdowns of methanol plants in Iran

It was reported that due to high natural gas price in Iran, Kaveh and Kimiaya had to shut their methanol plants with combined capacity of 3.95 million mt/yr. As of Aug 15, methanol capacity amounted to 13.86 million mt/yr in Iran, with average operating rate at around 36%.

In a conclusion, methanol cargo arrivals to China are expected to reduce to about 1.3 million tons in Aug. If Sierbang restarts its MTO plant in Aug, the pressure of rising inventory of methanol could get alleviated.