Methanol market to continue the sideway movements

1. Tank inventory decreasing

Methanol cargo arrivals to China coastal market slowed down due to bad weather last week, and the tank inventory at reserve areas showed a decreasing trend.

In this week (from Mar 10 to Mar 16), about 146,000 tons of methanol cargoes are expected to arrive, while 15,000 tons are getting re-exported. The reduction in tank inventory is anticipated to continue. Arrivals to Zhejiang is estimated to increase, but that to Jiangsu are limited. In southern regions, after the intensive arriving last week, there's no shipment arriving and the inventory is expected to reduce this week.

2. Interior region methanol price supported by spring turnarounds

Methanol price continues the strength, bolstered by spring turnarounds of coal-based methanol plants in Mar. The supply reduction and ongoing turnarounds are expected to continue supporting methanol price on the high side.

3. Methanol imports hovering low, but imports from Iran expected to recover

In the near term, China methanol imports are expected to hover low in Mar and Apr, leading to continuous inventory reduction. But the focus should be laid on the progress of Iranian plant restarts.

With the weather getting warmer in Iran, several plants are likely to restart. Sabalan, Zagros as well as Kaveh show intentions of restarting their methanol plants in the latter half of Mar. Then, the cargoes arriving at China may increase in mid or late Apr. As for non-Iranian origin cargoes, Malaysia's Petronas shut in 1.7 mln mt/yr methanol plant unexpectedly last week, and thus the shipments to China further decreased.

4. MTOs under severe losses

With Zhejiang Xingxing and Ningbo Fund restarting their MTOs in late Feb or early Mar, China MTO operating rate has increased to highs. In addition, demand typically picks up in Mar and Apr, and therefore, methanol price strengthens. However, the economics for MTO units is worsening which may cause plant shutdowns. Tianjin Bohua's MTO unit is slated to undergo maintenance in Apr.

In a conclusion, methanol inventory reduces and demand picks up, but methanol price rise is restricted by expectation of import recovery as well as concerns about economics of MTOs. Methanol market is likely to continue the sideway movements.