With the re-production of the pre-maintenance equipment, the problem of methanol oversupply will be aggravated. However, trade frictions between China and the United States, as well as increased U.S. sanctions against Iran, will have a positive effect on the market, and methanol will be stronger in the near future.
| Sulfamic acid |
Emergency Support Price
In early May, US President Trump claimed that tariffs should continue to be levied on China, and the situation of Sino-US trade problems has sharply declined. China’s methanol imports from the United States account for about 1% of China’s methanol imports, and the direct impact on the methanol market is limited. However, China will import a large number of plastic products from the United States. Once the United States begins to impose tariffs, the number of plastic products imported from the United States will drop dramatically. This part of the gap will be filled by the domestic, thus promoting the demand for coal-based olefins.
In addition, the United States announced that it would impose tougher economic sanctions on Iran, lifting the previous immunity granted to eight countries and regions to import crude oil from Iran. Iran has drawn up a contingency plan for blockade of the Strait of Hormuz, and the situation in the Middle East is sharply tense. In addition to driving up oil prices, there are rumors in the market that the United States will ban all countries from importing chemical products, including methanol, from Iran, which is China’s largest source of methanol imports. If tensions between the United States and Iran intensify, market concerns about this will further support methanol prices.
The pattern of supply and demand is not optimistic
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The methanol enterprises which routinely overhauled in the earlier period concentrate on resuming production in the middle and late May, and the domestic supply will increase substantially. However, as the price of methanol continues to decline, the economic situation of the production enterprises is not good. At present, the profit of the coal-based methanol production enterprises is about 200 yuan/ton, while the southwest gas-based methanol production enterprises are in a loss. In this case, the bidding willingness of the production enterprises is obvious.
In terms of emerging demand, the construction of coal-based olefins in China has been stable, 600,000 tons of new equipment in Jiutai has been put into operation, and the MTO plant in Nanjing Chengzhi has also been divided, and the demand for coal-based olefins has shown a stable trend. In the traditional downstream area, the profit of glacial acetic acid declined sharply, some enterprises began to repair, and the start-up load decreased. Formaldehyde industry is in a loss state, and affected by environmental protection, the start-up load is limited. Therefore, methanol demand showed a slight weakening trend.
Huge port inventory is an important reason for the continued weakness of methanol futures prices. As of May 8, the port inventory of methanol was 777,100 tons, down by 89,900 tons at the high point, with a range of 9.95%. Among them, the inventory of East China Port was 660,400 tons, while that of South China Port was 117,700 tons, down by 45.72% at the high point, while that of South China Port was 116,700 tons, down by 98,300 tons at the high point. With the gradual decline of imported methanol arrival at port, domestic port inventory is showing a high drop trend. Nevertheless, during May 1st, there was a small accumulation of port stocks. In addition, compared with the same period last year, port stocks were still at a high level, and high stocks still had a suppressive effect on prices. On the whole, the supply and demand pattern of methanol is still not optimistic. The problem of oversupply will become more and more obvious in the later period. It is difficult for supply and demand side to provide sustained power for price.
| Magnesium Sulphate |
In summary, with the pre-maintenance enterprises resuming production and the overall weakness of demand side, the problem of methanol supply exceeding demand will further deteriorate, but at present, the production enterprises are in a slight profit state, and the downward space of methanol is gradually compressed. In this case, methanol prices are expected to come out of a rebound, in order to repair the current low profits, it is suggested that the operation can take a buy-at-a-bargain strategy.