Worsening profit leads to decline of MTO plant operating rate

Recently, news about MTO plant shutdowns and production cuts are heard frequently. As a result, China methanol price moves down in tandem. It is mainly attributed to worsening of MTO profit in negative territory, as methanol price has advanced obviously after Chinese Lunar New Year while olefin price does not catch up with the rise. The expectation for MTO production cuts has enhanced continuously.

From the chart above, it can be seen that China domestic MTO/CTO plant operating rate is closely related to PP-3*methanol spread. When the spread slips to negative, plant operating rate would drop correspondingly, while when the spread rebounds to positive, plant operating rate would rise.

As of Mar 24, the average operating rate of MTOs in China was assessed to 83%, down from the high point of 89.55% on Feb 23, reflecting the drop of PP-3*methanol spread which has been negative since the beginning of 2024.

Due to the worsening of MTO profit, there have been more plants announcing turnaround plans in the second quarter.

As of Mar 24, Inner Mongolia Jiutai, Xinjiang Hami Hengyou and Fund Energy Ningbo have shut their MTO plant for maintenance, and therefore the average operating rate of MTOs has been down to 83%. In Apr, the operating is anticipated to further decline to below 80%. As the MTO plants would undergo turnarounds in sync with their methanol units in Apr and May, the impact on methanol supply and demand could be limited, and any MTO plant entirely relying on merchant feedstock methanol should be watched closely.

It is true that the decline in methanol price is not only due to weakened demand from MTOs, but also to concerns about the recovery of overseas supply. However, with the support from methanol plant turnarounds in spring, methanol supply remains tight in China.