Recovery of imports weighs on China methanol price

China methanol price has been falling persistently since early Apr, to around 2,535-2,540yuan/mt as of Apr 9, compared to 2,600yuan/mt in the beginning of Apr and 2,700yuan/mt in the beginning of Mar in East China.

Firstly, methanol imports were anticipated to rebound with plant operations recovered in Iran. As of Apr 3, the average operating rate of methanol plants in Iran had reached 80%, approaching the high level seen in Nov 2023. High plant operating rate would lead to large amount of shipments to China. In Nov 2023, shipments loaded from Iran and bound for China reached 900kt, and therefore about 900kt of imported cargoes with Iranian origin arrived at China in Dec 2023.

Then, market participants showed concerns about the large amount of Iranian-origin cargoes to arrive at China in May which could exceed 900kt. (It would take about 1 month for the cargoes to arrive at China.) In recent two weeks, Iran's methanol shipments to China were about 250kt per week, and if the amount continues, over 900kt of shipments within a month can be expected.

Therefore, China's methanol imports are expected to increase gradually in Apr and May, which may reach 1.1~1.15 million tons in Apr, and even exceed 1.35 million tons in May.

Secondly, China coal price declined and some methanol plant turnarounds got postponed. China methanol supply and demand could keep a balance, as the spring turnaround season begins. If there's no unexpected demand reduction, China methanol inventory may decrease slightly.

However, after the first week of Apr, some plants have decided to postpone the maintenance which was earlier scheduled to begin in mid-Apr.

Demand for coal is decreasing, as hydro-power generation is increasing and heating demand in North China has come to an end. With coal pricing dropping, the economics of methanol based on coal has recovered substantially. As a result, the scale of methanol plant turnaround is getting smaller in Apr. The expectation of less production reduction combined with collapse of coal cost, methanol market was overwhelmed by bearish sentiment.

On the other hand, with methanol price dropping, China MTO plant operating rate has recovered to around 89%. Ningbo Fund has restarted its MTO plant in early Apr and Jiutai Energy restarted its plant earlier than scheduled. The production cuts of MTOs earlier was the driving force behind the previous round of decline in methanol price. But now, it seems that if methanol price tracks the weakening of coal, methanol to coal spread as well as olefin to methanol spread could maintain at an acceptable range.