SunSirs: Regional Price Differences Are Driving Changes in Cargo Flows; in the Future, Hubei's Methanol Supply Will Become More Diversified

Current Supply and Demand Situation of Methanol in Hubei Province

Hubei's total local production capacity is approximately 1.8 million tons. Local enterprises primarily focus on targeted supply, with external sales accounting for less than 30%. Specifically, Jingmen Yingde Gas's methanol is mainly supplied to Qianxin Acetic Acid and the newly commissioned ethylene glycol + dimethyl carbonate project in Jingmen; Hualu Hengsheng's methanol supports its downstream acetic acid industry chain products, primarily for internal use with a small amount of external procurement; and Hubei Saning's methanol is used to support its downstream dimethyl carbonate products and a small amount is sold externally.

The theoretical annual demand in the Hubei region is approximately 1.8 to 2.2 million tons, mainly concentrated in Jingzhou, Jingmen, Yichang, and other areas. The demand is primarily for traditional downstream products such as acetic acid, BDO, and formaldehyde, while there is also a significant demand from the local fine chemical industry, including silicone and glyphosate. Besides local dedicated supply, a portion of this demand is also met by supplies from the Guanzhong and Southwest regions.

From the perspective of cargo sources, rough estimates show that sources from the Guanzhong region account for 30-40%, while sources from Southwest China account for over 20%.  Transportation methods include both shipping and road transport. Sales methods include long-term contracts and spot sales. Guanzhong sources, due to their relative proximity, utilize road transport to cover markets in central and eastern Hubei; Southwest China sources, on the other hand, rely on the cost advantage of Yangtze River shipping to supply a single large terminal along the river in Yichang.

Therefore, the supply of goods circulating in the Hubei market is mainly from the Guanzhong region, and the price is determined by the price in the main source area, plus logistics and trade costs. When Guanzhong adjusts its prices due to changes in its own supply and demand, the impact will be transmitted to Hubei through the aforementioned cost transmission path. This results in Hubei enterprises lacking the ability to set prices in the local market and also creates regional price differences.

In December, cargo was being diverted from ports back to Hubei

Since the end of November, methanol prices in Guangdong have slightly declined due to high port inventories; however, prices in Hubei have remained relatively strong due to tightened external supply caused by temporary maintenance at a plant in the Guanzhong region, resulting in a widening price difference between the two regions. According to Jinlianchuang statistics, the maximum price difference between Guangdong and Hubei reached 33 RMB/ton in early December. It is understood that some end-users were making small-scale purchases of Guangdong-sourced methanol through trading channels at that time.

Previously, Hubei province relied on dedicated trucks to transport methanol, resulting in prohibitively high transportation costs. However, in early December, companies began experimenting with using return vehicles carrying downstream products to transport methanol from Guangdong province. This move broke the deadlock that prevented methanol from Guangdong from reaching Hubei. Notably, a terminal in Jiangling, Jingzhou City, is expected to begin operations for methanol products in March of next year, which could encourage more surrounding businesses to start receiving shipments by ship.

Future Outlook for Freight Flow in Hubei Province

With the increase in goods originating from Hubei, the traditional supply routes are facing adjustments. For example, the influence of the Guanzhong region on pricing in the Hubei market, which has been significant for a long time, may be weakened, and this will also have an impact on prices in Guanzhong. Local market prices will shift from solely referencing Guanzhong and the Southwest to also considering port prices. Regarding the Southwest, previously only one company utilized the advantage of Yangtze River shipping to supply goods to the region. After the methanol transportation facilities are put into use at the Jiangling terminal, more downstream companies may be able to receive goods via waterway. For ports (East China and South China), the customer base will increase, and the reverse flow of goods to inland areas may become a common phenomenon.

Overall, the Hubei methanol market has significant future development potential. It boasts convenient transportation, accessible by both land and water, and local demand exceeds supply, indicating a solid fundamental basis. In December of this year, the local market also saw impressive growth in downstream demand, with new projects for products such as ethylene glycol, dimethyl carbonate, and pentaerythritol coming online. With this increased demand, the supply structure of the local methanol market is expected to remain diversified in the future.

As an integrated internet platform providing benchmark prices, on December 24th, the benchmark price of methanol according to SunSirs was 2,150.83 RMB/ton, an increase of 1.45% compared to the beginning of the month (2,120.00 RMB/ton).

Application of SunSirs Benchmark Pricing：

Traders can price spot and contract transactions based on the pricing principle of agreed markup and pricing formula (Transaction price=SunSirs price + Markup).

If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.