SINGAPORE (ICIS)--China’s domestic methanol spot prices in Shandong are likely to stay firm in the next few weeks on restocking activity amid tight supply.
- Plant shutdowns tighten spot supply
- Arbitrage window to Shandong from nearby markets almost shut
- Buyers restock ahead of late-September/October holidays
On 19 September, the average methanol price in Shandong rose to Chinese yuan (CNY) 3,205/tonne ($468/tonne), up by CNY5/tonne compared with the previous day's settlement, according to ICIS data.
Scheduled turnarounds, as well as unexpected outages and unstable operations, of major methanol plants in September have tightened supply in Shandong.
Producers in Shandong have low inventories, and are mostly supplying customers under term contracts, and have limited volumes available for spot sales.
Yankuang Guohong’s plant has been running at low rates since it restarted on 12 September from a turnaround, and has yet to produce on-spec methanol, a company source said.
Tight supply also grips the market in Shaanxi province in northwest China, which supplies methanol to the Shandong market.
The unexpected shutdown of Shaanxi Yulin’s methanol units forced the company to purchase methanol from the local market for its downstream methanol-to-olefin (MTO) plant.
Outages at the two methanol plants of Shaanxi Shenmu Chemical further aggravated the supply tightness.
On 19 September, spot methanol prices in Shaanxi stood at CNY3,085/tonne, narrowing the gap with Shandong prices to CNY120/tonne.
Spot prices in Shandong were usually higher than those in Shaanxi by CNY260/tonne.
Meanwhile, downstream buyers are replenishing their stocks ahead of China’s Mid-Autumn and National Day holidays, providing further support to spot methanol prices.
The Mid-Autumn Festival is on 22-24 September, while China’s National Day celebration is on 1-7 October.
Market sentiment is bullish as September and October are the traditional peak demand season for methanol.
Focus article by Susan Kong
($1 = CNY6.85)