HC Chemical Network: The current methanol Methanol Olefin (MTO) in the coastal area is facing full-line losses, of which, business who produce ethylene and propylene polymer are facing more losses.

Limited production + low inventory of methanol usher in “warm winter”

This year, not only methanol production enterprises in Hebei, Shanxi and Henan, limited production, but coal chemical industry in Shaanxi Province will also be limited. Relevant information shows that coal chemical enterprises in Shaanxi Province this year will implement measures to reduce air pollution and winter haze by shifting peaks and reducing production. As a result, not only the capacity of nearly 4 million tons of methanol in North China is affected, but also the well-known coal chemical industry in the world, Shaanxi Province, the second largest methanol production capacity in China, with a total methanol production capacity of nearly 10 million tons will also be heavily impacted.

On the other hand, there is a relatively low stockpile of middlemen and downstreams behind the limited supply lead. As the previous forecast for the end of the year is not good, many downstream companies maintain low inventories to cope with their own limited production and the decline of methanol prices. However, after the production was limited, most downstream enterprises maintained their demand. The decrease in demand for methanol was less than expected. However, the MTO enterprises in the coastal area maintained a high load, which kept methanol spot prices going higher.

Downstream profits shrinking rapidly

Unlike the rising price of methanol, crude oil, the other major olefin for olefins, started a pullback after it hit a two-year high last week. After the price of crude oil fell, the international prices of  ethylene and propylene will continue to decline.

In winter, the demand for polyolefins is relatively off-season, and the downstream demand for olefin polymers will be weakened until after the Spring Festival next year. This year is the year of minor maintenance of petrochemical plants. Its own supply is slightly higher than that of the same period of last year. Since October, the pre-domestic overhaul of olefin plants has gradually restarted, aggravating the situation that olefins supply exceeds demand.

At present, the main contradiction in the methanol market is still the contradiction between the steady demand of the methanol-to-olefin enterprises in the coastal mining areas and the lack of supply from the Mainland and the imported ones. The 2 + 26 cities in the north and the limited production in Shanxi Province reduced the supply of methanol to coastal areas to a certain extent. On the import side, weaker and weaker supplies continued to be maintained this year, especially in the Middle East and Southeast Asia, with less stock in the port area. Recently rainfall in southern China is less than normal, and the Yangtze River enters the dry season, which undoubtedly affects the supply of methanol to the east China in the southwest. For the time being, MTO short-term losses have not yet hit the bottom line and before the MTO cut-off, methanol prices in coastal areas will remain strong.