Methanol demand has hardly improved

Since mid-August, the main contract price of methanol** has continued to fall. Pressure from supply has been highlighted, while downstream demand has continued to weaken.

The overall supply increased from the previous period. In August, the centralized maintenance period of methanol companies fell, and the company began to recover quickly. Since the beginning of August, the operating rate of enterprises has rapidly rebounded from the average level of the past five years. As of August 23, the operating rate of enterprises has reached 68.76%, which is higher than the highest level in the same period in history. At the same time, part of the new production capacity in the third quarter was put into operation one after another, which also increased the supply of methanol from the previous period.

In terms of port inventory, port stocks have increased sharply since the beginning of August due to the concentration of cargo in ports and low downstream demand. As of August 23, port inventory, including East China and South China, has remained at a high level of 599,000 tons. . In terms of import volume, the latest customs data show that the methanol imports in July continued to decline compared to June. The price of methanol inside and outside the plate is hanging upside down, and the import loss situation is still continuing, which makes the enthusiasm of methanol imports will be hit hard. The current situation in the Middle East is still not conducive to the import of methanol, making the expected reduction in the future import of methanol still exist. However, it is worth noting that the domestic overcapacity of methanol will to some extent make up for the reduction in methanol imports.

Overall, the supply of methanol is still sufficient and has increased from the previous period. The impact on methanol prices is relatively empty.

Downstream demand continued to soften In July, the downstream demand for methanol declined significantly from the average level in the second quarter. In the second quarter, the price of methanol dropped overall under the influence of weak demand. This shows that the downstream demand for methanol in July was even weaker. From the start of the major downstream enterprises of methanol in August, the rate of increase in the operating rate of formaldehyde enterprises is not obvious. The operating rate of dimethyl ether enterprises is mainly stable under the influence of the flat atmosphere of the liquefied gas market, and the operating rate of acetic acid enterprises is also relatively low. July did not change much. From this point of view, the downstream demand for methanol in August will not increase significantly compared with July, and the weak downstream demand for methanol will continue.

The central bank's two cuts in interest rates and interest rate cuts during the year have, to a certain extent, stimulated the release of domestic real estate just-in-time, but the real estate industry has not substantially warmed up yet. Under the influence of the country's heavy fist on real estate regulation, the real estate industry will have very limited incentives for methanol demand. Recently, it is reported that the Ministry of Housing and Urban-Rural Development is studying the further strengthening of real estate control measures. As a result, the “Golden September” that is about to enter will appear to be likely to increase during the “busy season”, and the expected increase in the demand for methanol terminals will be weakened.

As an important basic chemical product, methanol, downstream demand is more dependent on macroeconomic trends and changes in domestic policies. According to the latest macro data, the increase in CPI has continued to decline. In July, it even broke 2%; PPI showed a continuous negative growth, and the decline gradually expanded, reflecting that the problem of China's industrial economic downturn is not optimistic. In August, the initial value of HSBC China Manufacturing Purchasing Managers' Index (PMI) recorded only 47.8 points, a decrease of 1.5 points from the July final value, the lowest in 9 months, and a contraction range of 10 consecutive months. Under the influence of the expected slowdown in domestic economic growth, it is difficult for the downstream demand of methanol to substantially improve, and short-term prices will continue to fall.

Divergence in the moving average system From the daily chart of the methanol index contract, although there was a brief rebound in methanol after August, the 60-day moving average always shows a downward trend, indicating that the 60-day moving average has a large effect on price resistance. Other short-term moving averages have also begun to turn down recently. The overall average system is diverging downward, and the impact on methanol prices is relatively empty. We believe that the possibility of the methanol price falling below the low level since its listing is more likely.

In short, the methanol market in the third quarter will continue to exceed supply, and the market is unlikely to convert from bears to cattle.

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