All domestic coastal outsourced MTO units have been fully shut down, leading to a nearly one million tonne plunge in monthly methanol demand.

This extensive shutdown, in terms of both scale and coverage, is relatively rare in the sector. As the largest downstream consumer of methanol, the collective shutdown of MTO units has impacted the entire chemical sector chain including methanol, PP, and PE.

MTO stands to Methanol-to-Olefin. The coastal externally sourced MTO units in East China rely heavily on imported raw materials, with a significant quantity of methanol supply coming from Iran. MTO demand accounts to half of the methanol's downstream consumption.

The concentrated shutdown of coastal MTO units is mainly affected by two major factors:

On one hand, shipping disruptions in the Strait of Hormuz have led to a decline in the arrival volume of imported methanol, putting pressure on raw material supply;

On the other hand, downstream terminal orders to polyolefins such as plastic packaging and film are weak, and finished product demand is lackluster.

Before this, several core coastal MTO units including Tianjin Bohua, Nanjing Chengzhi, Ningbo Fude, Jiangsu Sinopec S-Energy, Shandong Luxi, and Zhejiang Xingxing had been shut down or operated at reduced loads one after another.

Data shows that the operating rate of domestic coal-to-olefin units has continued to decline this year, reaching 81.65% at the beginning of the year and dropping to 64.12% in August; the operating rate of port-based MTO units has plummeted sharply, falling to zero in late October. In previous years, the operating rate of port-based MTO units generally maintained around 30%, showing a significant contrast.

Summary of Coastal MTO Unit Maintenance/Reduced Loads

Key Takeaways

1. immediate Maintenance Type: Nanjing Chengzhi, which is under planned maintenance with a regular cycle of 20–30 days, however whether it will resume production on time is determined by MTO profits, with multiple delays in resumption in recent years.

2. prolonged Shutdown Due to Losses/Raw Material Constraints: Sinopec S-Energy, Zhejiang Xingxing, Luxi, Ningbo Fude, and Tianjin Bohua, which are not regular annual overhauls however economically driven shutdowns with no fixed maintenance cycle and no clear restart time, depending on the methanol-olefin spread and the arrival volume of port methanol.

High losses are the core reason forcing units to shut down.

Data shows that profit differentiation in the sector chain is significant this year, with the average monthly loss of MTO-PP exceeding 2000 yuan/ton in April, and the theoretical loss of East China MTO monomer once exceeding 4000 yuan/ton in October. However, integrated CTO (coal-to-olefin) units in Northwest China, with their own coal-based methanol capacity and no need to purchase expensive imported methanol, still maintain certain profits.

The methanol market has fluctuated sharply recently, showing a roller-coaster direction.

From October 8 to 9, the spot price of methanol in Taicang surged to 4832 yuan/ton, hitting a nearly five-year high, however dropped sharply by 17.27% just a week later, falling to 4000 yuan/ton on October 16, which translates to an olefin production cost of about 12500 yuan/ton.

With the collective shutdown of coastal MTO units, methanol demand has shrunk significantly.

Compared with the same period last year, the daily methanol consumption of coastal MTO units has decreased by 33,000 tons, and the monthly methanol consumption has decreased by nearly 1 million tons, which has alleviated the tight supply of port methanol to some extent.

The market is concerned about the impact of MTO shutdown on PP and PE prices.

sector analysis points out that coastal MTO units create not only polyolefins however also ethylene glycol, ethylene oxide and other items; currently, PDH and naphtha cracking units maintain stable operations, and the overall supply and inventory of polyolefins are not tight. Coupled with the concentrated discharge of new PP and PE capacity this year, MTO is a high-cost marginal capacity, so the production reduction of units can only support polyolefin prices, making it difficult to drive a substantial increase in prices. The low downstream operating rate and insufficient orders also lack the demand support to price increases.

to the restart time, the sector generally expects a extensive restart to be difficult in the short term.

The restart limit of MTO units is high, requiring two conditions to be met simultaneously: processing profits turning positive and sufficient imported methanol supply. The start-up and shutdown costs of MTO units are high, with substantial catalyst consumption. Even if there are temporary book profits, if the shipping schedule of imported methanol is unstable, there is a risk of raw material supply interruption after start-up, so companies are cautious about production investment.

sector insiders said that this collective shutdown of coastal MTO units is not a routine equipment maintenance, however a capacity withdrawal driven by economic factors. The immediate loss pattern of MTO is difficult to reverse, and coupled with the continuous shipping risks in the Middle East, the externally sourced MTO units in East China currently do not have the conditions to extensive restart. The market will continue to track the shipping situation in the Strait of Hormuz, the arrival volume of Iranian methanol, and the changes in downstream terminal orders.