Introduction:
This week, the front-month methanol futures contract (January) surged strongly to hit a new high. Non-industrial capital remains firmly bullish on the long-term supply-demand outlook for methanol. Amidst the strength of the January contract, the January-May inter-month spread has shown relative resilience in its positive arbitrage position. Conversely, market participants within the industry lean towards negative arbitrage strategies. This is driven by expectations that domestic supply-demand fundamentals will gradually weaken, with inventory accumulation in both inland and coastal regions in November largely confirmed. Consequently, the performance of the November and December contracts aligns with this view. Supported by the strong January contract, the November-January and December-January spreads exhibited favorable trends for negative arbitrage during the week.
Nevertheless, some traders maintain a directional long perspective. They argue that crude oil prices may remain persistently strong, as the market has already priced in the outcome of the US midterm elections. Furthermore, they believe the magnitude and speed of methanol inventory buildup may be limited, with post-buildup stock levels remaining low compared to historical averages. Additionally, recent strong performance from olefin monomers, potentially tight supply in November, and significant recovery—and possible sustainability—of Methanol-to-Olefins (MTO) margins have fueled rumors regarding plant restart plans. Although most factories have not officially confirmed these plans, operating rates at coastal and Shandong olefin plants remain core factors influencing methanol inventory trends and whether inland prices can successfully decline. These dynamics continue to cause anxiety among short sellers and those favoring negative arbitrage strategies.
Note: Figure 1 (MTO Full Production Margin Comparison) and its data source are omitted.
Recently, inland market participants have primarily adopted bearish operations based on supply-demand expectations. Therefore, demand for covering short positions remains a key factor preventing inland prices from falling smoothly. Domestically, spot diesel supply is tight, with utilization rates at atmospheric and vacuum distillation units in major refineries declining continuously, accompanied by a drop in production-sales ratios. Multiple factors are driving up transportation costs. Additionally, some Carbon-to-Olefin (CTO) plants in Northwest China increased external methanol procurement due to issues with their own methanol units. Inventory buildup at inland factory gates has been sluggish, which may provide renewed support to quotations from producing region plants that were originally holding low inventories.
Note: Figure 2 (2020-2026 Methanol Sample Enterprise Inventory Trend Comparison) and its data source are omitted.
Regarding imports, the final volume unloaded by foreign vessels in October was 349,700 tons. For November, expected import volumes from foreign vessels range between 439,900 and 519,900 tons. Since shipments from two main Middle Eastern sources have not been fully confirmed, combined with the continuous replenishment of domestic shipments, inventory accumulation in coastal regions is inevitable. However, the extent of this accumulation remains undetermined.
In summary, Chempricehub believes that industrial fundamentals and financial capital expectations continue to pull against each other, maintaining market divergence. Against a backdrop of steadily improving margins in traditional downstream sectors, the inland market closely monitors fuel demand and subsequent external procurement activities by CTO plants. Meanwhile, the coastal market pays close attention to the total volume of domestic-arbitrage shipments and the confirmation status of certain foreign vessels, assessing their impact on the magnitude of inventory buildup.
Comments
0