Overview
Last Week Review:
In the near term, macro sentiment has dominated China's domestic methanol market. Last week, macro sentiment was weak, and the overall market was soft. However, inland regions had support from unit maintenance and falling inventories, so resilience was relatively stronger. The price spread between coastal and inland markets narrowed, and the arbitrage window closed. This week, macro sentiment has strengthened, and combined with declining domestic methanol inventories, the market has turned firmer.
Methanol Focus Points:
Short term — geopolitical situation; changes in import volumes; changes in upstream and downstream units.
Medium-to-long term — sustainability of the geopolitical situation; changes in international methanol units; changes in domestic upstream and downstream units.
Contents:
I. Mixed gains and losses in the methanol value chain
Coal prices and methanol prices in Northwest China both moved higher; coal price gains exceeded methanol price gains, so coal-to-methanol margins narrowed. Domestic methanol supply declined as some units entered maintenance. Supported by downstream external procurement, methanol producers sold smoothly and inventories fell. In coastal methanol markets, due to weather factors, unloading volumes from international vessels were extremely low, and port methanol inventories declined.
II. Domestic methanol market oscillated with a firm bias
Specifically, in this period, the port methanol market was mainly firm. During this cycle, due to typhoon weather, multiple ports were closed to navigation, and port arrivals were low. Port methanol inventories therefore fell sharply, but because this was a short-term impact, the price-driving force was weak. Overall, prices during the week were still mainly influenced by macro sentiment, oscillating with a firm bias. In inland regions this period, methanol prices rose steadily. Geopolitical risk sentiment has not yet subsided, supporting the market. Combined with tighter supply in domestic production areas, downstream buying enthusiasm increased on expectations of price increases. Supply in many regions tended to be tight, jointly pushing prices up.
Table 1 Methanol Weekly Supply-Demand Balance (Unit: 10,000 tons)
| Type | This Week | Week 1 Forecast | Week 2 Forecast | Week 3 Forecast |
|---|---|---|---|---|
| Enterprise inventory | 33.40 | 32.40 | 32.13 | 32.27 |
| Port inventory | 60.00 | 72.00 | 72.00 | 67.00 |
| Total methanol output | 194.37 | 189.20 | 189.89 | 195.92 |
| Coal-based output | 162.62 | 157.92 | 158.68 | 164.54 |
| Coke oven gas-based output | 18.55 | 18.28 | 18.20 | 18.44 |
| Natural gas-based output | 12.46 | 12.26 | 12.26 | 12.27 |
| CO₂ hydrogenation-based output | 0.18 | 0.18 | 0.18 | 0.18 |
| Submerged arc furnace off-gas based output | 0.56 | 0.56 | 0.56 | 0.48 |
| Import volume | 5.80 | 33.33 | 18.56 | 10.74 |
| Total supply | 200.17 | 222.53 | 208.45 | 206.66 |
| Export volume | 0.50 | 3.00 | 4.00 | 2.00 |
| MTO consumption | 94.28 | 92.06 | 92.40 | 94.58 |
| Formaldehyde consumption | 13.64 | 13.65 | 13.77 | 13.77 |
| Other consumption | 102.68 | 102.82 | 98.55 | 101.17 |
| Total consumption | 211.10 | 211.53 | 208.72 | 211.52 |
| Supply-demand balance | -10.93 | 11.00 | -0.27 | -4.86 |
Data source: Chempricehub Information
Notes:
The market's core focus remains on whether the Strait can be reopened and on vessel availability. After all, terminal inventories in the Persian Gulf remain relatively ample, and the Strait also determines September methanol import supply and inventory trends. However, there have been many bullish rumors on olefins recently, and because the August inventory build was greatly affected by typhoons, a short squeeze is evident. Closely monitor the progress of US-Iran negotiations.
This week, domestic methanol capacity utilization declined, and market supply decreased significantly. Futures rose sharply, while inland olefin producers actively purchased. Other buyers' willingness to purchase improved, trading sentiment improved, producers' sales were good, and transaction prices in the main production areas rose.
Currently, the areas affected by weather have all reopened. Next week, international vessels are likely to resume normal unloading. It is expected that arrivals of international vessels will be relatively high. Although withdrawals from affected storage areas have recovered, apparent import demand may still remain weak. Overall, port methanol inventories are expected to accumulate next week; pay attention to the speed of vessel unloading and changes in withdrawal volumes.
In this period, inland methanol enterprise inventories declined as expected on a month-on-month basis. Domestic methanol project maintenance is still relatively concentrated, and near-term supply-side increments may be difficult to materialize. Meanwhile, as buying sentiment improved during the week, upstream plants actively increased spot sales, and combined with low inland plant inventories, overall enterprise inventories continued to decline. Looking to the next period, inland enterprise inventories are expected to continue destocking, as relatively balanced inland supply and demand, along with active transfer of earlier high-priced orders, support upstream inventory digestion.
This period, enterprise pending order volumes increased month-on-month. As futures were firm and spot supply was tight, upstream plants actively released increments at higher prices during the week, while midstream and downstream players replenished on dips and some olefin producers in production areas engaged in external procurement. Regional orders increased month-on-month during the period. Looking to the next period, pending order volumes are expected to decline; focus on the digestion of previous orders and the sustainability of midstream/downstream follow-through.
During this cycle, coastal methanol markets were affected by weather, and the unloading speed of international vessels was limited. Some downstream international vessel cargoes were not unloaded, and inventories declined on consumption. As prices rose, some downstream buyers' purchasing sentiment was moderate, and external procurement volumes fell slightly.
Zhongtian Hechuang Phase 1 unit halted as scheduled, and the MTO industry operating rate continued to decline.
This week, the profitability of East China MTO enterprises continued to rise. During the week, East China methanol market prices rose somewhat, increasing production cost pressure. As olefin monomer prices continued to rise during the week, East China MTO enterprise profitability continued to increase, maintaining an attractive level. This week, the Northeast Asian ethylene external market showed a trend of first falling and then bottoming out and stabilizing; the East China ethylene market mostly oscillated, with the weekly average price down from the previous week. This week, domestic propylene spot prices continued to climb, driven by both macro sentiment and supply-demand fundamentals; the international propylene market rose notably during the week. The market's strength was driven by both supply and demand.
III. International oil prices rose, with room to rise next week
International oil prices rose this week. The main bullish factors were: US-Iran negotiations were deadlocked, and the US and Iran have still not reached an agreement on reopening the Strait of Hormuz. Supply risk concerns continued, and unstable geopolitical conditions strengthened support for oil prices.
International oil prices are expected to have room to rise next week, with WTI likely at $79-$86 per barrel and Brent likely at $85-$92 per barrel.
IV. Summary and outlook
Supply: Next week, domestic methanol supply will continue to decline due to unit changes. In coastal methanol markets, unloading is expected to resume next week, and import volumes are expected to increase notably versus this week.
Demand: Next week, overall downstream demand is expected to change little. Export volumes may rise as restrictions are lifted.
Inventory: Next week, inland methanol production plant inventories are expected to continue to decline modestly due to recent smooth sales. Port methanol inventories are expected to rise as imports recover.
Raw materials: In mid-to-late August, the hottest period of summer is still ongoing. Daily coal consumption at power plants is expected to remain at a seasonal peak. Combined with ongoing safety inspections at production sites and limited import supplementation, coal prices still have some support, and the price center is expected to remain stable. Production costs support the methanol market; Southwest China natural gas-based methanol has weak profitability.
Overall logic:
Conclusion (short term): In the short term, inland methanol markets are supported by some downstream external procurement and low production plant inventories. In coastal methanol markets, imports are expected to rise first and then fall, with average apparent import demand. Port methanol inventories may change little after rising next week, and current fundamentals have limited impact on market prices. Recently, domestic methanol markets, especially coastal markets, have been dominated by macro sentiment, and the market may consolidate with fluctuations.
Conclusion (medium-to-long term): In the medium-to-long term, on the supply side, there are few scheduled maintenance plans for domestic methanol units, and import volumes depend on the impact of geopolitical conditions on international shipping. On the demand side, some downstream units in coastal areas have startup expectations, but their purchasing actions and feedstock inventories still need to be observed. On the other hand, in the "gold September, silver October" market, traditional demand may also improve. Overall, the long-term domestic methanol market may be prone to a stronger tone with fluctuations.
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