Methanol: Insufficient Momentum for Market Rebound, Decline in Both Volume and Price!
2023/5/31
Last week (May 15-19), the domestic methanol market continued to operate weakly. This week, both the port market and the domestic market continued to trend downwards, with overall trading volume shrinking.
In the domestic market, the methanol market saw a slight rise followed by a fall this week. The market showed some strength at the beginning of the week, mainly due to reduced supply from certain units undergoing maintenance and positive stimulus from downstream strong demand. However, as the units resumed production after the maintenance period and supply increased, coupled with difficulties in downstream demand recovery and a sluggish coal market, the market sentiment turned weaker, and the mainstream market in the domestic market faced downward pressure.
In the port market, although there was not much pressure on port inventories, cautious market sentiment prevailed due to expectations of increased import arrivals in the future. The mainstream spot market in the port also lacked upward momentum.
As of the afternoon of May 19, the methanol market price index in South China closed at 1010.54 points, down 48.34 points or 4.56% from the previous Friday (May 12) at 1058.88 points.
Manufacturer Dynamics
During the week, there were newly added maintenance units, such as Xinjiang Tianye and Shenhua Mengxi. There were also newly reduced production units, such as Nanjing Chengzhi, Shanxi Guangda, Shanxi Jiaohua, and Ningxia Baofeng. Additionally, previously under maintenance or reduced production units such as Inner Mongolia Jiuding, Guizhou Tianfu, and Sichuan saw their operations restored. Overall, the reduction in production outweighed the recovery, resulting in a lower overall operating rate for the week. The methanol operating rate for this week was 71.77%, a decrease of 3.12% compared to the previous week.
Downstream Products
During this week, the operating rate of individual products in the domestic methanol industry chain increased, but most showed a downward trend. Data shows significant growth only in formaldehyde production. The operating rates of other products were in decline, with MTBE experiencing the largest drop, reaching 5.46%.
In terms of acetic acid, the market remained stable this week. Due to continued rigid demand downstream, low inventory levels at manufacturers, and expectations of reduced supply due to upcoming maintenance by major manufacturers next week, the acetic acid market maintained its trend. However, with weak market conditions in the upstream methanol market and limited downstream demand, the acetic acid market lacked the driving force to push prices up and remained stable. It is expected that the acetic acid market will continue to stabilize as the supply-side maintenance benefits have been released, and the growth in end demand is insufficient. However, with no significant inventory pressure and the end of the month approaching, the market is expected to remain stable overall.
Regarding formaldehyde, the market continued to show sluggishness this week. Methanol prices in the upstream market continued to decline, with weak cost support. Moreover, the downstream market is currently in a low-demand season, and the real estate sector has low construction activity, impacting the enthusiasm of panel factories to operate, resulting in continued sluggish demand for formaldehyde and further depressing the overall market sentiment. In the future, with limited improvement in downstream demand in the short term, it is expected that the formaldehyde market will continue to operate weakly next week.
Future Forecast
On a macro level, the International Energy Agency (IEA) has revised its global demand forecast, with an optimistic outlook for crude oil demand. In addition, the seasonal increase in US operating rates and OPEC's production cuts provide positive support for international oil prices. However, if the debt ceiling crisis is not resolved in a
timely manner, the upward momentum of international crude oil prices may be constrained. In terms of supply, methanol units that underwent maintenance earlier are still expected to resume production next week, and the total supply will be higher than the planned maintenance units, resulting in ample supply and a bearish outlook for the methanol market. In terms of demand, the growth in operating rates of major olefin units is insufficient, and the demand for acetic acid and formaldehyde is decreasing, with only dimethyl ether showing some growth, which is not enough to support the overall market. Taking these factors into account, it is expected that the methanol market will continue to operate weakly. It is advisable to closely monitor the maintenance and restart situations in various regions, inventory levels, and downstream demand while exercising caution in operations.
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