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Methanol fundamentals are not optimistic

News Source:http://www.jinchemical.com/ ; SendDate:2019-8-12 9:45:19 

    In July, methanol prices continued to fall, futures and spot sentiment fell to freezing point, and at the end of the month, with inland shipments improving, methanol futures prices rebounded, it seems to usher in a turnaround. Is this a short-term weak backlash or a medium- and long-term bottoming signal?

    Oversupply is relatively clear. Methanol is a chemical intermediate. From the industrial chain point of view, upstream units are more large-scale and centralized than downstream units. In 2011, the National Development and Reform Commission (NDRC) has restricted the production of methanol from coal with a capacity of more than 1 million tons, and the existing plants with capacity of more than 500,000 tons are ubiquitous. This is especially true for overseas methanol plants, which usually have a scale of more than 1 million tons or even over 2 million tons. In the downstream, except MTO (methanol to olefins), other downstream devices are relatively small, such as traditional downstream formaldehyde and dimethyl ether units, which have more than 200,000 tons of capacity. Therefore, although there is a certain degree of downstream contraction this year, the upstream supply pressure is greater.

    Methanol import pressure is high. To understand the import situation of methanol market, we should first define the global supply and demand pattern of methanol. Globally, both output and demand are equally distributed between China and overseas countries. Since 2018, overseas capacity has been cashed in, including OCI in the United States, Marjan and Kaveh in Iran. It is estimated that overseas capacity will increase by more than 5 million tons in 2018 and 2019, with an annual growth rate of more than 5%. Overseas downstream is relatively solidified, with an average annual growth of about 1%-2% in recent years. Biodiesel in Southeast Asia is a rare bright spot, but the annual demand growth is expected to exceed 500,000 tons. Therefore, the whole overseas market is moving from balance to relaxation, and the spillover of overseas output can only be sustained by the Chinese market.

    Under the circumstance of oversea, China's imports are rising steadily. Specifically, since the overhaul period of the second quarter, China's import volume has increased to 900,000 tons monthly, about 200,000 tons more than the normal value of the previous two years. Since this year, only Nanjing Chengzhi Phase II MTO can meet the demand of 150,000 tons per month after the full load of the new large-scale methanol extraction plant put into operation in domestic ports. Therefore, incremental import alone is difficult to digest. Later, the probability of decline in imports is relatively small. At present, construction in Iran has been reduced, while in South America and New Zealand, there will be an increase. Other major sources of imports have not changed much. It is expected that imports will remain above 850,000 tons in August.

    Domestic output increased year on year. Domestic supply needs to pay attention to the following two points: first, this year's methanol plant maintenance is not as good as last year's; second, the manufacturers'production costs have limited support for prices. Methanol plant is generally overhauled 1 - 2 times a year, usually in spring and autumn, but last year the overall overhaul of the device was more, adding a round of preemptive overhaul in summer. In addition to spring maintenance this year, the start-up of the device is at a high level. According to monitoring, the overall start-up in June and July is 1 percentage point higher than last year.

    As methanol continues to decline, the production cost has attracted more and more attention. Relative to the price of origin, the most advantageous factor in cost is the Northwest coal-to-methanol producer, while the disadvantage is some inland natural gas-to-methanol producers. According to the calculation, there is still some profit in methanol production from coal, and the gas head manufacturer loses part of the parking. However, from the past experience, short-term losses do not necessarily lead to device parking, because the profits of the previous two years are better and can be maintained temporarily, more importantly, manufacturers do not want to easily stop and give up market share. Therefore, in the current coal price calculation, methanol production cost to price support is still limited.

    In a word, we should be alert to the risk of contract falling again, especially in recent months.

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