Methanol futures traded on the Zhengzhou Commodity Exchange lack momentum to rise and are expected to maintain sluggish on increasing supply pressure, analysts say.
The benchmark methanol contract for May delivery has been under 1,700 yuan/metric tonne (tonne) since the beginning of December given absence of confidence on the market. Currently, most methanol enterprises have finished their overhaul scheduled in October every year and usually lasting for more than a month, and already resumed production.
As methanol companies' operating rate is steadily rising, the methanol market is under increasing supply pressure. At present, methanol plants' operating rate stays at 63.79 percent, the highest level in the same period of the past five years.
By December 4, domestic methanol production capacity reached about 70 million tonnes, representing a significant rise from 65 million tonnes in a month earlier. However, despite rising operating rate and stocks, methanol sales are facing difficulties affected by snowy and rainy weather.
At the end of November, snowstorms in northern China blocked expressways and methanol transportation was restricted. Meanwhile, adverse weather has pushed up transportation fees and this made downstream enterprises reluctant to buy though methanol enterprises in northwest China frequently lowered ex-factory prices.
A rise of rainy and snowy weather also gives a blow to demand of the downstream products such as formaldehyde and acetic acid which see low production and tepid transactions.
With wait-and-see sentiment of methanol's downstream enterprises, the methanol market fails to have many bottom fishers though methanol prices have refreshed new lows. Market traders generally expect methanol futures prices to remain weak given high operating rate of methanol plants but faltering demand.
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