China methanol prices supported by reduction in imports

China methanol spot price and spot-futures basis increased recently. In Taicang of Jiangsu Province, offers for spot methanol were quoted up to 2,730yuan/mt on Feb 27, and end-Feb goods were discussed at premium of 200~220yuan/mt to May futures contract. In interior regions, trading prices also went up to 2,260-2,265yuan/mt in Henan and 2,000-2,030yuan/mt in Northwest China.

Firstly, recovery of plant operations was slow in Iran, while some plants in Americas underwent maintenance. The gas restriction cycle in Iran began from early Dec 2023, during which the average operating rate of methanol plants in Iran had dropped from high point of 80% straightly to 14% and international methanol plant operating rate (excluding China) fell from 69% to 51%. Then, after Iran's Bushehr and Arian restarted their plants in Feb, the average operating rate has rebounded to about 30% in Iran. Some source says Iran's Kaveh is restarting its 2.3 million mt/yr methanol plant and then the average operating rate could rebound to above 40%.

Though the gas restriction period began in Dec, Iran-origin shipments to China remained large in Jan, as plants had stocked earlier and cargoes were exported from stocks. In Feb, however, as earlier stocks had consumed, shipments from Iran reduced obviously, amounting only slightly above 200,000 tons, new low in 3 years.

Outside Iran, methanol shipments of other origins to China also reduced compared to the same period of last year. Some plants in Americas, including Trinidad and Tobago's CGCL and US' Koch and Fairway, underwent maintenance in Feb. The forecast of methanol imports of China for Mar is revised down to 800~850kt, down from the month earlier.

Plant operations in Iran

As of the time of the writing, methanol cargo arrivals to China have reached about 900kt, including Iranian-origin cargoes of 500kt and non-Iranian origin cargoes of 400kt. In the week ending Feb 29, tank inventory at coastal regions is expected to further reduce, with quite low amount of cargoes to arrive.

With rising methanol price, PP-3*methanol price spread has been squeezed rapidly to approach -500yuan/mt, but as of now, China MTO plant operating rate maintains high. From the perspective of historical data, MTO plant operating rate is related to the spread, and given the current spread level, MTOs may cut operating rates. Luxi Chemical's MTO plant is under shutdown, and Nanjing Chengzhi Phase II is poised to undergo scheduled maintenance in Mar.

In a conclusion, methanol market is currently bolstered by reduction of cargoes arrivals, combined with high MTO operating rate. The imports from Iran are expected to recover in Apr as the gas restrictions may end in mid-Mar. Participants in methanol market are now focusing on plant operations in Iran, MTO operations as well as the upcoming methanol plant turnaround peak in spring in China.