Core View: Neutral Supply: Domestic maintenance has increased recently, leading to a slight decline in operating rates. However, many restarts are planned for late May, suggesting a potential supply increase. Imports remain low. While four Iranian methanol plants have restarted, their operating rates are not high. There have been some shipments in May, but volumes are low overall. Imports in June are expected to remain low, with the focus remaining on geopolitical developments. Demand: Traditional downstream demand is weak, entering a seasonal off-peak period. Operating rates for downstream products like formaldehyde, acetic acid, and MTBE have declined recently, and domestic purchasing sentiment has cooled significantly. Olefin demand is weakening. The Shenghong MTO plant has a planned shutdown scheduled for late May, and other MTO plants are operating at suboptimal rates. There are also rumors of potential shutdowns at other units, requiring close monitoring for actual implementation.
The US-Iran geopolitical stalemate persists. International crude oil prices have continued to rebound recently. While domestic chemical products have followed crude higher, they are constrained by weak demand, making them relatively weaker than crude. For methanol, the main contradiction lies in low imports, which is supporting continued inventory drawdowns at ports. However, this is countered by the traditional demand off-season and the expectation of weakening olefin demand, putting pressure on methanol prices. In the short term, methanol is expected to remain in a wide range of fluctuations. Consider expanding the PP-3MA spread on dips.
Thermal Coal: Neutral Coal prices have rebounded recently, with strong support from the approaching peak summer season. Domestic Supply: Slightly Bearish Domestic operating rates remain high. Although rates have declined slightly due to some maintenance, many restarts are planned for late May. Imports: Slightly Bullish Some Iranian methanol plants have restarted, but shipment volumes in May remain low. June import expectations are low, maintaining the expectation of port inventory drawdowns. Downstream Demand: Slightly Bearish Traditional downstream operating rates are falling as the seasonal peak transitions to off-peak. Olefin demand is weakening, with Shenghong's MTO plant planning a maintenance shutdown. Upstream Margins: Slightly Bearish Coal-to-methanol margins are high. Natural gas-to-methanol margins have improved, and coke oven gas-to-methanol margins have recovered. MTO Margins: Neutral MTO margins have improved recently and are currently neutral. Inventory: Slightly Bullish Port inventories continue to decline, as do domestic inventories. Overseas supply remains low. Operating rates have slightly declined.
As of the week ending May 14, the national methanol plant operating rate was 76%. This includes an 82.1% operating rate for coal-to-methanol plants, 57.9% for coke oven gas-to-methanol plants, and 51.6% for natural gas-to-methanol plants.
Many plants are scheduled for restart at the end of the month.
Overseas operating rates remain low after a recent brief increase. Few Iranian methanol plants have restarted. The 1.65 million-ton Busher plant restarted in early May. Focus on changes in actual shipment volumes from Iran.
Coal prices have rebounded. Coal prices have remained firm recently. Strong international energy prices provide support, and with the summer peak season approaching, power plant inventory replenishment has increased. However, under China's coal supply guarantee policy, coal prices are expected to remain stable overall.
Upstream margins are favorable. Coal prices have rebounded slightly, and domestic methanol prices are relatively strong, leading to good margins for coal-to-methanol plants. Natural gas-to-methanol margins have improved slightly recently, and coke oven gas-to-methanol margins are high. As of May 19, Inner Mongolia coal-to-methanol profit was 474 yuan/ton, Southwest natural gas-to-methanol profit was 250 yuan/ton, and Hebei coke oven gas-to-methanol profit was 920 yuan/ton.
MTO reduction expectations. MTO margins are acceptable.
As of May 14, the MTO operating rate was 81.1%, with little change. A domestic integrated olefin plant was shut down but restarted early this week. The operating rate for methanol-to-olefin plants using purchased methanol was 77.4%, remaining stable. Monitor the shutdown of the Sirbon MTO plant.
East China MTO plant margins have been acceptable recently, mainly due to firm olefin prices and strong propylene prices, coupled with relatively weak methanol prices, leading to continued improvement in MTO margins.
The Shenghong MTO plant plans to shut down for maintenance at the end of May. The Shenghong MTO plant plans maintenance in late May. Chengzhi has a shutdown plan for later, while Zhong'an United restarted this week.
Traditional downstream demand continues to weaken. Traditional downstream operating rates continue to decline, entering a seasonal off-peak period for some products. Operating rates for formaldehyde, acetic acid, and MTBE have fallen slightly. As terminal demand weakens and methanol prices remain firm, traditional downstream margins have decreased and are currently at their lowest level in recent years for this period.
Downstream purchasing sentiment is low. Downstream procurement volume remains low. On one hand, there is a lack of low-priced port cargo; on the other hand, traditional domestic downstream demand has softened, leading to overall weaker downstream demand. In the short term, downstream procurement is expected to remain low.
Domestic orders remain low. Downstream orders have declined. With downstream demand in the off-season, domestic orders are weak.
Exports increased significantly in April. International prices remain high, and the domestic-international price spread for methanol persists, making exports profitable. Monitor actual export transactions. China exported 173,000 tons of methanol in April.
Continued inventory drawdown. Ports continue to draw down inventory. Domestic inventories recently shifted to a drawdown, mainly due to increased domestic maintenance and essential downstream restocking. Last week, port inventories were 752,200 tons, with 240,000 tons being readily available. Port inventories continued to decline, and data released this week showed another significant drawdown. Arrivals remain low, and ports are expected to continue drawing down inventory.
Downstream raw material inventory drawdown. Inventory at sampled MTO enterprises decreased significantly. Coastal MTO enterprises made few purchases, mainly consuming their own raw material stocks. Raw material inventories at traditional downstream manufacturers also declined. After concentrated pre-holiday restocking, consumption during the holiday period was the main activity. Furthermore, weakening downstream demand has reduced enterprises' willingness to actively restock.
Basis weakens. The basis has weakened, while calendar spreads have rebounded slightly. The port spot basis has weakened slightly. Expectations of coastal MTO plant maintenance have temporarily pressured spot prices, but the expectation of continued port inventory drawdowns remains, suggesting the basis should stay firm in the short term. The September-January calendar spread rebounded after a decline, remaining within a fluctuating range. The traditional demand off-season and recent expectations of weakening MTO demand are pressuring near-term prices. However, expectations of sustained port inventory drawdowns support the near term, suggesting limited downside for the calendar spread, which is expected to fluctuate.
PP/L-3MA spread rebounds. The PP-3MA spread has strengthened recently, while the L-3MA basis has weakened. The difference in strength is mainly due to the performance divergence between PP and PE, with PP showing stronger performance. Methanol has followed PP's relative strength, while PE has been relatively weaker. In the short term, with expectations of reduced MTO demand supporting PP and pressuring methanol prices, the spread is expected to continue rising.
Balance Sheet Methanol Monthly Balance Sheet
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