The supply and demand of methanol will weaken from the previous month, and the short-term market will be dominated by shocks.

Source: Minmetals Futures Author: Minmetals Futures

Research report text

Supply side:Recently, the number of upstream maintenance devices has increased, and the overall upstream load has dropped from a high level. This week, the start of work rose slightly to 72.71%, +0.13% month-on-month. The arrival volume was 174,700 tons, 63,500 tons from the previous month.

In terms of profit, the profit of coal production continued to fall, and the loss was relatively large. The profit of coke ovens rose slightly, but they were also in a state of loss. The profit of gas production fell, and the profit was relatively neutral. Overall,MethanolProduction margins are at low levels.

From the perspective of installations, Ningxia Kunpeng’s 600,000-ton/year plant may produce products in November, and Shanxi’s plant will resume in late November, and the supply in the mainland is still relatively loose.

Demand side:Formaldehyde dropped month-on-month, and the start-ups of acetic acid, dimethyl ether, and MTBE all picked up, and the traditional demand generally picked up slightly. Jiangsu and Zhejiang MTO started 52.58%, -0.73% month-on-month, and the performance is still weak.

The overall methanol-to-olefins start-up was 77.06%, which was -0.09% month-on-month. Affected by the economy, the overall load of MTO enterprises is not high, and most products are at a loss. The current demand is still weak, and the possibility of continued load reduction in the future cannot be ruled out.

in stock:The total port inventory was reported at 549,700 tons, which was -9,800 tons month-on-month, and the absolute inventory was still at a low level. The enterprise inventory was +22,400 tons month-on-month, reported at 535,200 tons, which was at a high level in the same period. The low port inventory kept the port basis at a relatively high level , while in the Mainland, with the return of supply-side maintenance equipment and the impact of weak demand, corporate inventories have accumulated to a high level, and the price difference between ports and the Mainland has risen again.

Looking ahead, methanol will maintain the overall supply and demand balance in November, but with the subsequent commissioning of Ningxia Baofeng’s 2.4 million tons plant, it will turn into a surplus in December.

Valuation:The current 01 contract still has a basis of more than +220, and the December contract also has a basis of nearly +100. From the perspective of the basis, the market is relatively underestimated. From the profit point of view, the coal system suffers serious losses, the inventory has risen from a low level, and the static valuation is low.

From the perspective of downstream profits, the performance of traditional demand profits is acceptable, but MTO profits are still at a low level in the same period, and corporate losses are still relatively large, and the profits of the industrial chain are concentrated on the raw coal side. From the perspective of price comparison, the price difference between methanol and urea has fallen, and the price difference between crude oil and coal has fallen. Overall, the valuation of methanol is neutral and low.

summary:The port inventory fell slightly, and the mainland inventory rose slightly. It is still a pattern of low port inventory and high mainland inventory. The absolute level of overall inventory is not high, but it still increases month-on-month. On the supply side, domestic start-ups have fallen slightly, and international methanol starts have fallen month-on-month. Recently, domestic start-ups have continued to fall, but it is expected that the room for subsequent declines will be relatively limited, and imports will increase slightly but only to a limited extent.

The profit of MTO on the demand side fluctuated at a low level, and the start-up of coastal installations was low, showing an overall weak performance. Overall, the short-term basis is relatively strong under the absolute low inventory level, but looking forward to the future, there will still be greater supply pressure in the future, and the supply and demand of methanol will weaken month-on-month.

The current pattern of high basis and low inventory has not changed. After entering the winter, supply-side disturbances will increase. It is expected that the space for methanol to fall is relatively limited, but the high level of coal at the raw material end has weakened, and the follow-up may cause the overall cost of methanol to decline. The short-term market is dominated by shocks, and in the medium term, the shocks will remain weak under the weak downstream demand and the return of supply.

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