Increasing supply and imports to drive methanol market in China

The offtake of methanol goods from reserve areas in East China's Taicang market has been slow recently. It averaged about 4,000 tons per day, down by 34% from the same period of last year. It is mainly attributed to low-priced materials from interior regions, as well as slack demand from traditional downstream sectors.

However, the tank inventory of methanol at reserve areas in coastal regions is projected to increase. Methanol plant operating rate has risen further in Iran, with up to 880kt of cargoes loaded in Jul bound for China. The cargoes were loaded intensively in the latter half of Jul, which would arrive at China in the latter half of Aug. Iran remains the largest supplier of methanol to China. The amount of cargoes loaded in Aug has reached 500kt month-to-date, and it is estimated to exceed 900kt heading to China throughout the month.

In interior regions of China, product inventory at methanol plant keeps increasing continuously, with operating rate hitting this year's new high, but traditional downstream sectors are still in slack demand season. Operating rate of formaldehyde plants is lower than 30%, that of acetic acid has dropped to below 80%, and that of DME, MTBE and DMF also hovers low.

On demand side, slack demand in traditional downstream industries continues while demand recovery from MTOs is impressive. With methanol price dropping, PP-3*methanol price spread widens. As a result, several MTO units get restarted amid improvement in profits. Tianjin Bohai Chemical is restarting its 600kt/yr MTO plant, and Nanjing Chengzhi is poised to restart its Phase II MTO plant.

In a conclusion, demand for methanol is increasing with MTOs restarting, while the supply is also rising, and supply and demand are expected to be loosely balanced in Aug. In the case of this scenario, financial and commodity markets would bring obvious impact on methanol, but the impact could be short-lived, and the increasing supply could drive methanol market in the near term. Plant maintenance in the autumn should also be watched closely.