Destocking process "reversing" Methanol rebound persisten

  • Jan, 09th 2019

Methanol futures continued to rebound in the near future due to the impact of stocking. However, considering the domestic supply pressure is still large, the sustainability of demand remains doubtful, so the recent rise in methanol is still treated as a rebound.

Supply pressure is not reduced

In December last year, domestic methanol prices continued to fall, coupled with insufficient downstream orders, domestic methanol producers began to focus on maintenance, and domestic methanol start-up load also fell to near 58%. s level. Entering the New Year, the overall start-up load of domestic methanol plants will rise, but there is also regional differentiation. The equipment in the North China area that was repaired in the early stage will be re-produced in large quantities, and the equipment in the southwest area will stop due to gas supply problems. On the whole, there is a narrow arbitrage space for methanol in Shandong and the port. Therefore, driving in Shandong and North China will help to expand the arbitrage space, thus promoting more sources of goods into East China. As for the southwestern region, due to the arbitrage space being closed, the overall maintenance of the southwestern region is relatively limited for East China. Therefore, we believe that the impact of domestic supply on methanol is still bearish.

In terms of imports, due to the recent slow appreciation of the RMB, import costs have fallen and arbitrage space has opened. In addition, the current foreign installations are stable except for the unstable installations in Brunei, Malaysia and New Zealand, and the imported goods are abundant. Under this circumstance, the domestic methanol import volume has rebounded, and the supply pressure in East China has increased.

Due to the increase in domestic supply and imports, the current methanol port inventory is still at a high level in the same period. As of December 27 last year, the inventory of Huadong Port was 451,800 tons, an increase of 154,800 tons compared with the same period of last year, an increase of 52.12%. Not only that, but throughout the month of December, the methanol port inventory is still in an increasing trend, and the market destocking process has opened a “reverse”. Limited demand increase

Due to poor production profit and the industry's entry into the off-season, the coal-to-olefins enterprises in East China started to work poorly. At present, only the facilities in Ningbo Fude and Jiangsu Surban are operating normally in East China. Both Xingxing New Energy and Changzhou Fude Devices are in a state of parking, which has caused a significant drop in methanol demand in East China. In addition to the East China region, the coal-to-olefin plant in Shandong Province has also undergone a relatively centralized maintenance situation, which has made methanol demand in Shandong.Down, the local methanol supply is abundant. At present, as the price of methanol has fallen more than the decline of olefins, the profit of coal-to-olefins has been repaired. The market believes that Xingxing New Energy is expected to restart after the Spring Festival. As the Spring Festival approaches, companies have a certain amount of rigid replenishment demand, which will promote the short-term demand for methanol. As for the traditional downstream, formaldehyde and dimethyl ether are difficult to increase due to factors such as environmental protection, and the contribution to methanol is limited. Although glacial acetic acid has a decline in industry profits, orders in the domestic market are still acceptable, and the starting load has not risen and risen, and the demand for methanol has also been boosted.

Overall, the domestic start-up load and imports of the supply side all have rising expectations, and the inventory is significantly higher than the same period of the previous year. The supply pressure of methanol is relatively high. On the demand side, due to stocking before the holiday, the demand for methanol will gradually recover in the short term, but the sustainability of demand still needs to see the start of Xingxing New Energy. Under this circumstance, we believe that the short-term stocking market will stimulate the rebound of methanol, but the persistence of the rebound is doubtful. In terms of operation, short-term and multi-single operations are mainly used, and long-term and long-term multi-singles still require guidance of technical and fundamental follow-up signals.