Methanol prices in China’s Shandong to stay range-bound amid quiet trading

Susan Kong

19-Dec-2018

SINGAPORE (ICIS)–Spot prices of methanol in Shandong, China, are likely to stay range-bound with market players expected to remain on the sidelines until a clearer price direction emerges.

– Most buyers are side-lined and are making hand-to-mouth purchase
– Local methanol plants have no inventory pressure
– Market participants closely tracking newly-built methanol unit

On 18 December, average methanol prices fell slightly by yuan (CNY) 20/tonne to CNY2,380/tonne in Shandong, mainly because of weak demand from downstream industries, according to ICIS data.

Spot methanol prices in Shandong reached a 2018 low earlier this month at CNY2,295/tonne, following a downtrend which stretched about two months.

Buying sentiment then improved following the dip in prices as downstream units in Linyi began to replenish their stocks after restarting.

However, as most restocking purchase had already finished early last week, buying sentiment waned again in line with the plunge in futures values. The talks of the start-up of a newly-built methanol unit in north Shandong also aggravated buyer’s bearish sentiment.

Spot prices were then weighed by weak demand for downstream factories purchased on a hand-to-mouth basis.

However, the price declines may be limited by tight spot supply.

On one hand, most local methanol factories are facing no inventory pressure. About 50-70% of their outputs are used to secure term supplies for MTO (methanol-to-olefin) plants.

Moreover, the turnarounds at some methanol units also limit local spot supply.

Company Capacity (kt/yr) Unexpected/Planned Shutdown Period
Yankuang Guohong 500 Unexpected Shutdown 28 Nov – 1 Dec
Yankuang Guohong 500 Unexpected Shutdown 13 Dec – 18 Dec
Tengzhou Shenglong 100 (No 1) Planned Maintenance 18 Dec – 27 Dec

On the other hand, possibility of domestic deliveries are scant as the arbitrage window between the nearby market and Shandong was nearly shut.

For example, the price gap between south Shandong and Shaanxi Guanzhong, which is a major source of domestic deliveries, is now around CNY130/tonne, while the transportation fee is about CNY180/tonne.

Some market participants believe that Shandong methanol spot prices may slump after Luxi Chemical Group’s newly-built 800,000 tonne/year methanol unit starts begins commercialising.

However, other argued that nearly half of the methanol output would likely be used on its own company’s downstream unit, so supply increase is limited in the short term.

($1 = CNY6.89)

ICN

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