Starting from October 2022, the Chinese methanol market price kept going down, and by the end of May 2023, the Chinese methanol benchmark market price reached RMB 2,280/ton, and the futures market closing price price was as low as below RMB 2,100/ton, hitting a low in recent times. The continuous dip in methanol market prices has led to significant volatility in both methanol industry chain markets. How far will methanol market prices fall? Is the methanol market set to touch the historical low again? According to the relevant data, as of the end of May 2023, the Chinese methanol market has seen 10 consecutive months of decline, with the lowest price touching RMB 2,100 per ton. Looking at the price trend from 2011 to May 2023, the historical lows appeared in January 2016 and August 2020, with the lowest price around RMB1,650/mt. And the current price of 2,100 yuan/ton is the lowest price in the past 10 months and the lowest point price from the weak fluctuation after the price rebound in 2020. From the price trend of the past 12 years, although the current Chinese methanol market price has not touched the historical low, it has basically fallen below the average price of the past 12 years. According to the statistics, the average price of Chinese methanol benchmark price in the past 12 years is at RMB 2,440/mt, which is the average price of the past 12 years, and it has fallen below the average price of the past 12 years, indicating that the current price has fallen below the support of the historical average price.
The main reason why the Chinese methanol market has fallen for 10 consecutive months, on the one hand, lies in the weak fluctuation of the crude oil market, which has brought the same weak influence to the bulk chemicals, and crude oil is one of the main reasons for the long-term decline of the methanol market. On the second hand, the contradiction between supply and demand in China’s methanol market has existed for a long time, with high port stocks and high start-up load of domestic producers, causing the Chinese market to maintain a high supply pressure throughout this year, which is the reason for the continuous decline in China’s methanol market price. On the third hand, the international market continues to be weak, which has a continuous negative impact on the Chinese market. Fourthly, the sluggish demand in the downstream consumer market, such as the continued sluggish consumption of formaldehyde, was transmitted to the methanol market through the latitude of the industry chain. The above is the analysis of the market aspect of the reasons for the price decline in the Chinese methanol market, and many information companies have done detailed analysis many times, so we will not do too much analysis here. At present, the industry is more concerned about how far this decline will go. Whether it can touch the historical low of 1650 yuan / ton? First of all, let’s analyze what kind of market price has come out in April-June of previous years in China methanol market. To show the magnitude of price volatility, Pingtou calculated the year-on-year monthly price change (i.e. the volatility of the current month’s price compared to last year’s price) over the past 10 years. The year-over-year rate of change in the monthly average price shows a clear seasonal pattern. Methanol as a flammable liquid, the temperature rises at the same time, the danger of storage is also rising, many companies will reduce their own inventory, to be in response to the high temperature of the weather, which also invariably reduces the effective space for storage, to provide storage pressure for the price decline. So, if the summer prices in previous years fell year-on-year, can also confirm this logic. According to the past 10 years April-June year-on-year price change rate, of which six years there was a year-on-year decline, there are four years of time year-on-year rise. And of the years that have fallen, all have seen a decline in April-June. So if there is strong seasonality in methanol, there is a high probability that April-June 2023 will also see a year-over-year decline.
From this analysis perspective, methanol market prices are still likely to fall in the future, and are expected to fall until around June.
In terms of looking at the price fluctuations in the middle of the last 2 years, as you can see from the chart below, the Chinese methanol market started to fall in October 2021, and during this period, the RMB 2400/mt line was touched 2 times, in January 2021 and in August 2022. So the reason why RMB 2400/mt is a very strong support level is because this point is the average price for the past 12 years and can be considered as the low support price recognized by the methanol market. And now it has successfully fallen below the support line of RMB 2400/mt, with the lowest price falling to RMB 2280/mt and the futures closing price falling to near RMB 2100/mt. This reflects to a large extent to the market that the consensus on the positive factors that have been formed in the Chinese methanol market now exceeds the consensus on the positive factors that have been formed in the market over the past 12 years.
In addition, through the analysis of cost factors, the current Chinese power coal market price is around 900 yuan/ton, and the cost of methanol is calculated to be around 3000 yuan/ton, if measured according to the pit price coal price, the cost of methanol is around 1500 yuan/ton. And the lowest price of methanol in history is at 1650 yuan/ton, which also reaches the lowest limit value of methanol cost. Therefore, assuming that there is very serious bearish pressure in the methanol market this time, as well as the premise that the crude oil market continues to fall, the lowest limit of methanol decline is expected to be at 1650 yuan/ton. Finally, the price fluctuation of methanol market directly determines the price fluctuation of chemical industry chains with methanol as raw material, such as olefin industry chain, formaldehyde industry chain, dimethyl ether industry chain, MTBE industry chain, etc. This time, the methanol market price continues to fall, which has a direct impact on the overall chemical industry chain fluctuations. The longer and deeper fall this time has made many people in the market feel the huge pressure. From the current market trend, it is expected that the methanol market will still have some possibility of falling in a short period of time, the futures market performance will precede the spot market, and the key support position of the methanol market price will still be the maximum limit cost level at present
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