China methanol prices at year-to-date high on winter supply crunch, up 20% on year

Singapore — The Chinese methanol market has emerged from the pandemic with a V-shaped recovery in the fourth quarter, with CFR China prices hitting a year-to-date high of $254/mt Nov. 25 on expectations of tight methanol supply from Iran in winter.

Chinese methanol futures have rallied strongly over the past two weeks on expectations that Iranian methanol producers could experience gas supply shortages in winter, in line with last year, and significantly reduce exports.

Iran's household sector is forecast to use 650 million cu m/day of natural gas once the weather turns cold, up 30% from 500 million cu m/day currently. Gas delivery to power stations could potentially be cut to 50 million cu m/day unless domestic users reduce gas consumption, local media reported in October.

Recent tenders for Iranian spot cargoes have concluded at 10-12% premiums to CFR China formula prices, putting prices of Iranian methanol on par with Middle East spot cargoes, which were heard discussed at around $285/mt in the week starting Nov. 23.

CFR China methanol prices at $254/mt are back to levels seen in January and are around 20% higher than in November last year, rebounding from an 11-year low of $152/mt in June, S&P Global Platts data showed.

The upward trajectory has also come on the back of improved downstream demand from methylene diphenyl diisocyanate, ethylene vinyl acetate, polyvinyl alcohol and recent oil rallies, and not just the tight availability of Middle East and Iranian methanol spot cargoes, trade sources said.

China's GDP in Q3 grew 4.9% year on year, boosted by strong consumer spending and domestic tourism. Industrial production rose 6.9% on year in October, beating market expectations of a rise of 6.7%, while retail sales grew 4.3% on year, up from 3.3% growth in September and marking the third consecutive month of expansion, data from China's National Statistics Bureau showed.