Key Characteristics for China Methanol Market in Q1, 2018 (Part 1)
March 10, 2018
China methanol market price vibrated downward in the first quarter of 2018.
In the first quarter of 2018, China methanol market traced a downtrend, though the price rebounded some times in the period. Prices in East China, Shandong and Northwest China decreased by 14.97%, 17.30% and 22.01% in the first quarter, respectively. The status of arbitrage windows between regions was decided by the local methanol price and freight rate. Entering 2018, the shipping closure, low inventories at ports, logistics and transportation, restart of natural gas-based methanol units and maintenance all exerted influences on China methanol market.
According to market sources, in end-January, most arbitrage window between regions opened. However, the overall cargo arrivals were limited considering the bad weather. The shipping closure and low inventories underpinned the methanol market at ports.
Entering February, the methanol price vibrated narrowly. However, the Chinese New Year holiday exerted obvious influences on the market. After the holiday, methanol prices plunged in inland market and at ports, especially on Feb 26th and 27th, as methanol inventories surged, natural gas-based methanol plants resumed operation in advance and the operating rates of downstream units were low. Under such circumstances, traders’ sentiment became bearish and methanol futures price declined as well.
China methanol market price increased after falling in March. Before March 22nd, the spring maintenance plans led to the open of arbitrage windows between inland market and ports. More inland methanol goods flowed into port market and some traders bought spot resources and sold methanol futures, exerting bearish influences on the market in late March. In addition, the China-US trade war dragged down US stock and bulk commodity market. On March 23rd, the most traded methanol futures contract price decreased by 3.48% day on day, and moved sideways in the following few days.
The influence of maintenance kept strengthening.
The operating rate of China methanol industry in the first quarter of 2018 showed a wide inverted “U”-shaped trend, being similar with that in 2017. The average operating rate in January was 58.71% and that in February increased by 3-4 percentage points MoM. The highest point of 66% appeared in early March. Afterwards, the operating rate began to decline and finally reached 58.71% in end-March.
Traditionally, the operating rate of methanol industry begins to decline from March and declines further in the following two months, April and May. However, in 2018, incomplete statistics showed that the production loss in March was predicted to be around 450,000 mt, higher than the 290,000 mt production loss in April.