Futures Cash Arbitrage Opportunities In Methanol Market

- Mar 13, 2019-

Futures cash arbitrage opportunities in methanol market





In March, the domestic methanol market showed a sharp rise, in which the mainland market continued the upward trend after the Spring Festival in February, and the port also showed a significant follow-up.




The data show that since February 11, the price of methanol has shown a sharp upward trend. Among them, the price of methanol in Inner Mongolia has increased from 1900 yuan/ton to 2200 yuan/ton, in Shaanxi from 2000 yuan/ton to 2400 yuan/ton, in Shandong from 2150 yuan/ton to 2500 yuan/ton, and in port areas from 2400 yuan/ton to 2600 yuan/ton.




Interview with Mid-term Freight Daily reporter learned that the price rise to a certain extent has initially reflected the market's de-inventory expectations, the market mentality is good.




"Since the Spring Festival in February, the mainland market as a whole is in the state of depot, and the current state of depot is good, coupled with the March-May upstream factory spring inspection plan, Inner Mongolia olefin new plan, the follow-up probability of depot is higher." Jin Lianchuang analyst Wang Pu told reporters that at present, upstream factories have strong expectations of low warehouse and spring inspection, good mentality, intermediary traders are relatively optimistic, downstream factories have demand for replenishment of earlier contracts.




In Wang Pu's view, the basic de-warehousing supports the rise of the mainland's center of gravity, while the rise of the mainland's center of gravity supports the rise of the bottom of methanol futures. It can be said that the rise of methanol futures reflects the expectation of de-inventory. In addition, changes in overall macroeconomic expectations, including the recent sharp rise in the stock market and the overall recovery in commodity futures, have also contributed to price increases.




After the rise of methanol price, the production profit of MTO industry, the largest downstream of methanol, has changed significantly.




"Compared with the whole year of last year, the current production profits of many MTOs in the port area are already at a low level." Jia Ruibin, chief data officer of Tianfeng Futures, said that MTO producers will probably choose to stop after a significant loss, which will have a significant impact on methanol demand, and even reverse the depot rhythm of methanol. Therefore, investors must focus on the production profits and plant dynamics of MTO when trading.




"At present, methanol to olefin enterprises have sufficient profits to maintain production, and the spot price of methanol is lower than futures, the actual profit is higher than the face profit." Yu Qiansen, an analyst at Zhaojin Futures, said that the sharp drop in methanol last year had restored the profits of most downstream enterprises. With the gradual start of future demand, downstream profits are expected to further improve, or will accelerate the process of methanol de-inventory.




In Qiansen's opinion, it is an indisputable fact that there are many units of methanol to olefins in the future. "The current market risk point is that the depot of the port is not as expected, and the pressure of new methanol plants abroad on the domestic market still exists. However, with the onset of spring inspection in the Mainland, the supply will gradually decrease. If there is a mismatch in time, the price of methanol will be depressed.




Through the price difference structure chart, we can see that the methanol market has shown a strong upward discount characteristics. "With the further steepness of the spreads curve, the market will provide a formal opportunity for low-risk futures, i.e. buying spot futures and selling futures." Jia Ruibin said that in order to reduce the cost of holding spot, investors could consider buying paper goods in late March or April instead of spot, that is, buying paper goods and selling futures.