China methanol import demand softens on MTO shutdowns

SINGAPORE (ICIS)–China’s import demand for methanol may remain weak in June following shutdowns of domestic methanol-to-olefins (MTO) facilities, with prices softening after a strong run-up from early April.

A number of domestic MTO plants shut their plants, either due to planned turnarounds or squeezed margins. Chinese MTO plants posted an average run rate of 69% last week, according to ICIS data.

Two major MTO producers decided to re-sell some of their imported methanol cargoes to the ex-tank market in east China.

“It does not make sense to maintain high methanol inventories during our turnaround when present methanol prices are so high,” a source at a major MTO producer said.

“Instead, it makes sense to sell our methanol stock now, and to replenish our inventories closer to our plant’s restart date when the methanol prices are lower. If methanol prices remained high, we are fine to delay our restart slightly,” the source added.

In end-March to April, a number of Asian players saw an opportunity to export volumes initially intended for China to other countries, where better netbacks were available. During this time, prices in India exceeded those in China.

In April, about 40,000 tonnes of methanol were re-exported from China, according to market sources. This, coupled with below-average imports in May, resulted in tight port inventories and rising coastal prices in both east and south China.

China is a major importer of methanol, with monthly import volumes pegged at around 680,000 tonnes.

In March, the country’s actual methanol imports stood at 730,094 tonnes.

Availability of spot import supply is expected to improve in June with the restart of methanol plants in the Middle East in mid-May, but some market players expect inventories at Chinese ports to stay tight throughout next month as imported cargoes will arrive in July at the earliest.

In the week ended 25 May, methanol import prices in China were at $375-415/tonne CFR (cost & freight) China, down by $3-15/tonne from the previous week, after climbing 14.6% over a six-week period, according to ICIS data.

Domestic prices softened week on week to Chinese yuan (CNY) 3,085-3,520/tonne ($483-551/tone) ex-tank on 25 May, the data showed.

Market players view the recent decline in China’s methanol import prices as a correction which would be short-lived.

“The price correction should be over, and ex-tank prices since then had stabilized and should be relatively stable in the near future,” a Chinese trader said.

Focus article by Kite Chong

($1 = CNY6.39)

Additional reporting by Sam Liang

Photo: Container port in Qingdao, Shandong Province in east China. (Photographer: Yu Fangping/Pacific Press via ZUMA Wire/REX/Shutterstock)