Differentiation of Mainland and Port Market of Methanol

Recently, Zheng Alcohol regained its weakness under the pressure of reducing fees and taxes and driving of internal and external disc devices. The 1905 contract fell below 2500 yuan per ton. The author believes that with the follow-up spring inspection and the start of Jiutai MTO, methanol prices in the Mainland are relatively strong, while port prices are always suppressed by high inventory. In the case of price differentiation between the mainland and the port, Zheng alcohol futures price or into the oscillation mode.

Spring Inspection and Jiutai Production Support Methanol in Northwest China

Since March, methanol prices in Northwest China have remained relatively strong under the expectations of spring maintenance and Jiutai MTO driving. As of March 19, the mainstream market price of methanol in Inner Mongolia was 2200 yuan/ton, up 150 yuan/ton from March 1, up 7.3%. As of March 19, the mainstream market price of methanol in Shandong was 2270 yuan/ton, while that in Hebei was 2300 yuan/ton, which was 100 yuan/ton lower than that on March 1 and was flat.

March-May is the centralized maintenance period for methanol production enterprises in the Mainland. According to the current maintenance plan, the methanol production capacity involved in maintenance this year exceeds 10 million tons/year, which is equivalent to the same period last year. From the time point of view, the production capacity of maintenance in March is 2.74 million tons/year, in April is 6.62 million tons/year, and in May is 2.03 million tons/year. Maintenance is mostly concentrated in late March to April, which is ahead of the same period last year. From the regional perspective, methanol overhaul in the Mainland is mostly concentrated in the northwest of China, involving production capacity of 8.5 million tons/year, with Inner Mongolia accounting for the largest proportion, including China Coal Yuanxing 600,000 tons/year, Inner Mongolia Rongxin 900,000 tons/year, Jiutai 1 million tons/year, Yigao 300,000 tons/year, Donghua 600,000 tons/year, New Austria 600,000 tons/year, Jinchengtai 300,000 tons/year, involving production capacity of 4.3 million tons/year. From the perspective of production profit, since 2019, taking Inner Mongolia as an example, the average profit of methanol production is 47 yuan/ton, while the average profit of methanol production in the same period of 2018 is 450 yuan/ton. Although spring overhaul is mostly required by equipment, enterprises are more willing to carry out overhaul when production profits are poor.

Judging from the downstream demand, the 600,000 tons/year MTO plant in Jiutai, Inner Mongolia, started on March 20, and the end of March to April is the period of spring maintenance in Inner Mongolia in particular. From this point of view, the supply and demand pattern of methanol in Inner Mongolia will continue to be tight under the influence of Spring Inspection and Jiutai production. The formaldehyde enterprises in Shandong, Hebei and other places will also start construction one after another, which will support the price of methanol to a certain extent.

Port inventory pressure remains high

Compared with the mainland, the port methanol has always been depressed by inventory, and the price has dropped slightly. As of March 19, the mainstream market price of methanol in Jiangsu was 2485 yuan/ton, while that in South China was 2480 yuan/ton, which was 80 yuan/ton lower than that on March 1 and was flat. As far as port inventory is concerned, as of March 13, 80.86 million tons of methanol were stored in East China Port and 21.07 million tons in South China Port, totaling 1019.3 million tons. Although it has decreased from the previous week, it is not significant and the inventory has not been effectively digested.

Since the beginning of March, some external disc units have been repaired, including Iranian ZPC 1.65 million tons, horse oil 2.7 million tons, Brunei BMC 850,000 tons, Qafac 900,000 tons and Oman OMC 105,000 tons. It is expected that the arrival of methanol will be reduced slightly in mid-and late March. However, most of the outboard overhaul devices will be restored in early April, Malou has started this week, Marjan of Iran also plans to produce products this week. It is expected that the follow-up imports will remain high, and the depot cycle of the port has not yet been opened.

In summary, with the development of methanol spring maintenance and the start of Jiutai MTO, methanol prices in Northwest and Inner Mongolia are expected to be relatively strong, while ports are always suppressed by high inventory and the depot cycle is delayed. Mainland and port market differentiation, Zheng alcohol futures prices are expected to turn into oscillation.