Late methanol prices will rebound slightly

The recent commodity market has been turbulent. The monthly decline in the price of methanol has once exceeded 12%. With the relaxation of the macro environment and the improvement of the fundamentals of methanol in the later period, methanol ** is expected to go out of a slight rebound.

Relatively moderate macro environment

At present, the entire macro-environment continues to be hazy. Greece's breach of contract and the emergence of the Brexit crisis, the United States and Britain claiming a rate hike, and the sharp depreciation of exchange rate in emerging markets have plagued the commodity market. At present, the Greek issue has been temporarily eased. The Fed’s July FOMC meeting stated that the labor market has improved but inflation is still sluggish. Therefore, the U.S.’s rate hike in September remains doubtful. However, even if the US Federal Reserve raises interest rates in September, it will not have a big impact on the market. On the one hand, the market has long expected, and on the other, the Fed will have a long observation period after the first interest rate increase, and will not raise interest rates continuously. From the historical trend of the US dollar index, before the rate hike, the US dollar index rose due to expectations of rate hikes, but the US dollar index fell after raising interest rates. Therefore, don’t worry too much about the Fed’s interest rate increase. The current macro environment has changed significantly compared to the previous period.

Domestic supply pressure is expected to ease

In the first half of this year, the domestic methanol production was 19.21 million tons, a year-on-year increase of 10.84%. The increase in the northwestern region was significant, while the output in the Northeast, South China, and North China declined. In the first half of the year, the overall price of methanol rose, and new production capacity was slow. In the first half of the year, the new capacity was 870,000 tons, which was significantly lower than the level of the past three years The main reasons for the slowdown in production capacity are: First, the economic outlook is not good; Second, the pressure of environmental protection is high, and the coke oven gas production rate is declining due to coking production stoppages; third, the cost of making methanol from natural gas sources rises. Many gas head devices were forced to stop work. It is expected that the slow growth of methanol production in the later period will be the new normal.

Since the beginning of July this year, port inventories have fallen sharply. By the end of July, East China Port stocks stood at 350,000 tons, down 21% year-on-year; South China Port stocks were 130,000 tons, down 50% year-on-year; Ningbo Port stock was 148,000 tons, down 36.5% year-on-year. According to statistics, only 190,000 tons of goods can be circulated throughout Jiangsu. From May to July this year, methanol inventory and prices fell at the same time. The main reason is that businesses are not optimistic about the market outlook, and they mainly focus on low-cost inventory clearance. However, if inventory is low, it is very easy to cause tight supply in the market, which will lead to higher prices.

Judging from the device maintenance, the 7-9 month of each year is the peak period for the maintenance of the methanol plant. Although some equipment has been overhauled in the first half of the year, there are still equipment overhauls from August to September. From the operation statistics of the methanol plant production companies, the largest maintenance manufacturer is Ningxia Baofeng in the northwest region. In August, there was a maintenance plan involving methanol production capacity of 1.7 million tons. In addition, in early August, Rongxin Donghua and other manufacturers also had maintenance arrangements.

Short-term downstream demand is weak, but demand is still expected

The traditional demand for methanol downstream is mainly reflected in formaldehyde, dimethyl ether, glacial acetic acid, and MTBE. From the perspective of market performance in July, the traditional demand performance was weak, and the operating rate of formaldehyde, dimethyl ether, and MTBE was about 40%. Poor, mostly based on on-demand procurement, only the operating rate of glacial acetic acid is about 80%, but the impact on the overall demand for methanol is limited. The sluggish traditional demand will be the new normal for methanol consumption, and the major demand for methanol will be in emerging demand.

In the short term, the growth of emerging demand has slowed down, and profit from outsourcing of methanol to olefins in East China has shrunk, affecting procurement efforts. However, from a long-term perspective, it is estimated that 6 million to 7 million tons of methanol-made olefin plants will be put into operation in 2015, which corresponds to 18 million to 21 million tons of new methanol demand. From a long-term perspective, methanol has a gap of about 5 million tons. The downstream demand for methanol is still expected, and the future demand should not be too pessimistic.

In short, methanol ** is expected to usher in a new round of rally, but the rebound is limited.