China methanol supply to turn tight in the second half of the year

In the first half of 2024, China domestic methanol production is estimated to reach about 41.26 million tons, up 2.9 million tons from the same period last year. Northwestern region, the largest methanol producing area in China, accounted for 2.28 million mt/yr of the production increment.

Throughout 2024, China methanol production is expected to approach 84 million tons.

Methanol profits based on coal have been recovering this year, and domestic plant operating rate has been higher than the same period last year. In the first quarter of 2024, production loss due to plant maintenance was only 70-140kt per month, while the production broke through 7 million tons in Mar. In the second quarter, with the turnaround season ongoing, methanol production loss amounted to 1.42 million tons, but the supply has been recovering from Jun onwards.

In the second half year, the high temperature in the third quarter could bring about interruptions to plant operations, but any unexpected shutdowns due to economic issue would be fewer than in last year, as this year's coal price was capped by high inventory as well as hydro-power generation. In the fourth quarter, methanol supply could reduce due to turnarounds in fall, seasonal environmental protection requirements as well as gas restrictions.

From the supply and demand balance, methanol price is expected to keep weak before turning strong with inventory increasing before reducing. There could be high pressure from supply side in Jun and Jul, though there's talk that Zhejiang Xingxing may restart its MTO plant in Jul or Aug. Before the restart of the MTO plant, methanol price is likely to consolidate at lows.

In Aug-Oct, because of turnarounds in fall as well as peak demand season for investment and consumption on Sep and Oct, methanol supply and demand may turn tight.