Methanol supply to China decreases, demand rosy

On Sep 19, tank inventory of methanol at China's coastal reserve areas (including Jiangsu, Zhejiang, Guangdong and Fujian) reached 1.117 million tons, down 85.3kt from the week earlier.

The reduction of tank inventory was on account of fewer arrival and unloading of imported cargoes. In the week from Sep 12 to Sep 18, coastal reserve areas received about 257kt of methanol cargoes, down from 422.5kt in the week earlier.

In the week starting from Sep 19 till Sep 25, about 410kt of methanol cargoes are reported to arrive, however, due to the landing of Typhoon Pulasan on Sep 19, the actual arrivals of cargoes could be reduced.

Currently, the average operating rate of methanol plants outside China is assessed at around 65%, a relatively medium to low range. The average operating rate in Iran has dropped to around 65%, indicating a reduction of shipments for China. Market players also point out that due to the unfavorable price spread earlier, transaction of Iranian methanol has decreased, which also leads to fewer shipments to China.

As of Sep 19, the month-to-date shipments from Iran loaded in Sep was 410kt, and the volume is estimated to reach about 70kt till the end of the month (which are expected to arrive at China in Oct), much lower compared to previous months.

As for non-Iranian origins, the availability of cargoes remains tight. With the prices rising in Europe and the US, the spread to China methanol price is widening, and therefore, some shipments to China have been cancelled or cargoes are re-exported from China to other regions.

As a result, non-Iranian origin cargoes arriving at China are estimated to be 300-350kt in Oct, reducing from earlier. Given some cargoes getting delayed from Sep to Oct, China's methanol imports are projected at 1.1 million tons in Oct, down by 180kt from the same period of last year.

As for new plants outside China, US Geismer's 3.18 mln mt/yr methanol plant is currently running stably, after the startup in late Jul, while the startup of Malaysia's new 1.65 mln mt/yr methanol plant may get postponed to Nov.

In terms of demand, MTOs account for the largest part of methanol consumption in China. Currently, those standalone MTO units in East China which rely on merchant feedstock methanol are keeping high operating rates up to 90%, with steady appetite for methanol. We estimate tank inventory of methanol at coastal regions could fall by 300-350kt in Oct.

Moreover, there would be gas restrictions in the fourth quarter, and then, methanol supply would reduce, painting a rosy picture for methanol market.