OUTLOOK ’18: China methanol prices to stay high in Q1 2018

SINGAPORE (ICIS)–China’s domestic methanol prices are expected to hover at high levels in the first quarter of 2018, after hitting a peak in the last quarter of 2017 on the back of surging demand and deceasing supply.

The domestic methanol market experienced a roller-coaster ride in the first quarter of 2017 before reaching its peak in the last quarter.

The continued growth in methanol prices during 2017 is mainly contributed to the start-up and stable operation of the newly built methanol-to-olefins (MTO) plants, unstable operation of overseas methanol plants and decreased methanol supply due to lack of natural gas at the year-end.

The average run rate of domestic methanol plants in the first quarter will unlikely to increase and be largely stable at current levels.

Natural gas supply for the industrial sector has been reduced or even suspended from November 2017 as feedstock natural gas supply is extremely tight because priority is given to residential use during the cold winter season.

This has been weighing down production of gas-based methanol plants.

Major methanol plants being affected by limited natural gas are listed in the table below:

Region	Company	Capacity	Planned/unplanned maintenance	Shutdown time	Feedstock
‘000 tonnes/year
Qinghai	Qinghai Zhonghao	600	Unplanned	Down on 23 November, with the restart time unknown	Natural gas
Southwest China	Chongqing Kabeile	850	Unplanned	Down on 12 December, with the restart time unknown	Natural gas
Southwest China	Sichuan Jiuyuan	500	Unplanned	Down from mid-December, with the restart time unknown	Natural gas
North China	Boyuan	400	Unplanned	Down on 26 December, with the restart time unknow	Natural gas
Southwest China	Sichuan Vinylon	830	Unplanned	Down for 10 days from 20 December	Natural gas

Coal-to-methanol plants are maintaining stable production and no confirmed turnaround plans have been made in the first quarter of 2018.

In addition, as the start-up of the 5-6m tonnes/year of new capacities will be mostly in the last three quarters of 2018, domestic methanol supply will only increase slightly in the first quarter of next year.

Import supply will also be stable in the first quarter of 2018.

SABIC’s three methanol production lines, with a total of 2.40m tonnes/year of capacities  resumed operations in late December. But its line 5 with 1.7m tonnes/year of capacity shut down again.

Petronas PML’s No 2 methanol plant restarted around 25 December from the unexpected shutdown on 13 December.

But there were unconfirmed reports about several plants’ shutdowns in South America in late December.

Hence, tight methanol supply is expected to linger for some time in Asia.

A new methanol plant in North America with 1.7m tonnes/year of capacity will be started up at the end of the first quarter or in the second quarter of 2018, which will do little to ease the supply shortage in the first quarter.

And some market sources said that the startup date of new methanol plant of 2.3m tonnes/year of capacity in Iran maybe delayed to the second half of 2018 or even later.

On the demand side, methanol demand from the traditional downstream industries might falter in the first quarter of 2018.

There is always a lull in demand immediately ahead of China’s Lunar New Year holidays, which will fall between 15-21 February.

There might be a notable drop in the run rate of domestic formaldehyde plants during the holiday period, but such impacts might last for only around half a month. Demand from the downstream acetic acid and MTBE industries will be largely stable.

There is a chance that methanol to olefins (MTO) producers halt production or cut plant run rates because high methanol prices in the last quarter of 2017 but there are no confirmed reports yet.

Outlook article by Sam Liang

ICN