Overview
Review of Last Week:
Last week, low-volume international vessels arrived, with export and ship-loading demand supporting cargo pickups. Sufficient domestic supply continued, and truck-based cargo withdrawals at major storage areas were poor, leading to only a narrow decline in inventory. Domestic production continued to recover and increase, but order fulfillment was smooth, keeping producer inventories low and prompting limited cargo withdrawals. This week, the low volume of international vessels persisted, with export and downstream ship-loading demand supporting cargo pickups. Port methanol inventories unexpectedly declined. Monitor subsequent changes in downstream plant operating rates.
Methanol Focus Points:
Coal and Northwest China methanol prices both strengthened, with methanol price increases outpacing coal, leading to improved coal-to-methanol margins. Domestic supply saw a slight decrease due to plant maintenance, but weak downstream purchasing sentiment, coupled with insufficient transportation capacity, caused a slight increase in producer inventory. In the coastal methanol market, inventory declined due to low import volumes and support from export and ship-loading demand. Monitor the impact of downstream profit margins on downstream plant operating rates.
Specifically, the port methanol market experienced a strong rally this period. Port methanol inventories continued to decline this cycle. Although downstream demand remained lackluster, circulating volumes in the regional market were low. Furthermore, international tensions resurfaced, boosting macro sentiment, and basis strengthened significantly. Inland methanol prices continued to rise this period. Optimistic macro market sentiment continued to heat up. Combined with the current tight supply in regional markets, the prevailing market mentality of buying on rising prices and avoiding falling prices persisted. Downstream restocking for essential needs was released simultaneously, significantly increasing market trading activity and further pushing the methanol price center higher.
Table 1: Weekly Methanol Supply-Demand Balance Sheet (Unit: 10,000 tons)
| Category | This Week | 1st Week Forecast | 2nd Week Forecast | 3rd Week Forecast |
|---|---|---|---|---|
| Producer Inventory | 33.19 | 33.83 | 33.92 | 33.46 |
| Port Inventory | 56.61 | 62.00 | 57.00 | 50.00 |
| Total Methanol Production | 206.22 | 205.60 | 205.24 | 205.83 |
| Coal-based Production | 171.40 | 170.55 | 169.97 | 170.89 |
| Coke Oven Gas-based Production | 19.30 | 19.30 | 19.30 | 18.96 |
| Natural Gas-based Production | 14.60 | 14.83 | 15.06 | 15.06 |
| CO2 Hydrogenation-based Production | 0.22 | 0.22 | 0.22 | 0.22 |
| Ferroalloy Furnace Off-gas-based Production | 0.70 | 0.70 | 0.70 | 0.70 |
| Imports | 5.82 | 16.28 | 9.10 | 5.19 |
| Total Supply | 212.04 | 221.88 | 214.34 | 211.02 |
| Exports | 2.60 | 3.50 | 2.00 | 1.00 |
| MTO Consumption | 100.04 | 100.13 | 103.38 | 104.69 |
| Formaldehyde Consumption | 14.33 | 15.76 | 15.29 | 14.95 |
| Other Consumption | 100.77 | 96.46 | 98.58 | 97.84 |
| Total Consumption | 217.74 | 215.85 | 219.25 | 218.48 |
| Supply-Demand Balance | -5.70 | 6.03 | -4.91 | -7.46 |
Source: chempricehub Consulting
Notes:
International vessel unloading this week fell short of expectations, with some cargo volumes delayed to next week. Next week is expected to likely see inventory accumulation. However, no vessel cargoes have departed from the Strait since mid-May, which will inevitably continue to impact subsequent arrivals. Currently, port inventories have essentially bottomed out, and some export and ship-loading volumes are still expected. Although next week is expected to see inventory accumulation, subsequent port inventories still have room for a narrow decline. The absolute price of methanol will still be determined by macro factors. Before the Strait reopens, prices will continue to fluctuate at high levels with a strong bias.
Domestic methanol capacity utilization declined this week, leading to reduced actual output. Geopolitical conflicts reignited, causing a sharp rise in the futures market. Meanwhile, port inventories continued to decrease. However, limited downstream follow-through constrained the overall market upside.
For the next cycle, arrivals from international vessels are expected to be relatively concentrated. Downstream demand is lackluster. Port methanol inventories are expected to accumulate. Monitor the speed of international vessel unloading and expectations for downstream plant changes.
Domestic producer inventory increased as expected this week. The increase was mainly concentrated in the main production area of Northwest China. Besides the restart of some previously temporarily shut-down projects, current downstream profit margins are poor, leading to weak demand and average procurement volumes. Transportation capacity matching was also slightly inadequate. Combined with slower new order intake at elevated prices, inventory increased week-on-week. For the next period, domestic producer inventory is expected to continue its slight uptrend. Focus on the actual follow-through of midstream and downstream companies.
Pending orders from enterprises decreased slightly week-on-week. Except for an increase in orders from the Northwest production area, other regions saw a slight decline. The persistent volatility in the US-Iran situation has made market operations more difficult. Coupled with weak demand, recent new orders have been cautious about chasing prices higher, leading to a slight overall decline in orders. For the next period, enterprise orders are expected to decrease slightly week-on-week. Although macro factors are strong, the risk of negative downstream feedback requires vigilance.
Methanol prices rallied this week, but downstream profit margins were poor, purchasing sentiment declined, and external procurement volumes and feedstock inventories decreased simultaneously.
An individual plant in East China remained shut down. Some inland plants increased operating rates after previous reductions. Overall operating rates rose this week.
Profits for East China MTO plants declined sharply this week. Due to the sustained tight supply of imported methanol and the gradual decline in port inventories, methanol market prices remained high, increasing cost pressure on MTO plants. However, the propylene monomer market was weak, exacerbating profit losses for MTO plants. This week, the Asian ethylene market rose first and then stabilized, but due to the low base at the start of the week, the overall average price center moved lower. The domestic propylene market was overall weak and volatile this week, with price trends mainly influenced by the macro environment and supply-demand balance.
International oil prices fell this week. The main bearish factor was that, despite low-intensity military conflicts between the US and Iran, the US claimed this week that a peace agreement between the US and Iran could be reached within the next two weeks, easing concerns about supply risks.
International oil prices are expected to have upside potential next week, with WTI potentially trading between USD 90-98/barrel and Brent between USD 92-100/barrel.
1. Supply Side: Domestic supply will fluctuate with plant changes but will generally operate at high levels. In the next cycle, import arrivals are relatively concentrated, and overall levels are expected to remain low.
2. Demand Side: It is the off-season for downstream demand. Under the current high methanol prices, some downstream sectors have poor profit margins, purchasing sentiment is lackluster, and overall demand performance is weak.
3. Inventory Side: Overall, the domestic methanol market faces tight supply. Total inventory will remain at low levels, and market circulating volumes will also stay low. Monitor the impact on prices.
4. Raw Material Side: Current weak downstream demand and high port inventory accumulation are suppressing coal prices. Short-term correction space for coal prices is limited, with long-term bullish sentiment persisting. Production costs provide some support for the methanol market. Southwest China's natural gas-to-methanol plants have good profitability.
Overall Logic:
Conclusion (Short Term): In the short term, the coastal methanol market will continue its pattern of weak supply and demand. Market circulating cargo volumes are tight. Supported by some short-covering demand (demand to cover short positions), a strong floor forms in the market. Based on fundamentals, the coastal methanol market is expected to operate with high-level volatility. Inland methanol inventories will remain low, also providing market support. Beyond fundamentals, monitor the impact of the international situation on international shipping capacity and international plants.
Conclusion (Medium to Long Term): In the medium to long term, the methanol fundamentals are significantly influenced by international plant operating rates and international logistics conditions, presenting high uncertainty. Monitor developments in domestic and international methanol and downstream plants.
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