Subscriber Note: ICIS is considering adding a “Premium/Discounts on CFR China” quote to the weekly Methanol (Asia Pacific) report to reflect the growing influence of the formula priced deals on spot trade. Please send any comments or queries to hui.heng@icis.com
Deals and discussions this week
Deals at $380-385/tonne EXWH in China
Offer $375/tonne FOB China
Reported deal at $370-375/tonne CFR China, unconfirmed
Reported deal at $385/tonne CFR China, unconfirmed
Reported deal at $390/tonne CFR Indonesia, unconfirmed
$400-405/tonne CFR Indonesia deal, unconfirmed.
Deal $385/tonne CFR Korea, confirmed
Formula priced offer at premium of 1.5% to India
Formula priced offer at premium of 2-3% to Korea
Formula priced offers at premiums of 3% to China
Formula priced deals at premiums of 2.4-2.5% in China
Asia methanol prices rise on lack of offers
Asia methanol prices closed higher amid limited supply availability. There were two camps of thought on the demand-supply outlook. Buyers said downstream demand was weak and thus, the rise in prices would not be sustained. However, sellers said that supply was tight and prices would firm in the coming weeks.
On the demand front, Chinese market participants said downstream demand in China was weak in the formaldehyde and acetic acid sectors, while requirements were stable among dimethyl ether end-users. A few traders pointed out it was finally lucrative to sell material locally, and hence there has been a flood of offers particularly from bonded warehouses. Outside of China, Taiwan end-users said consumption of methanol was stable. Korean market participants said that demand was weak because some downstream factories slow down their operations in the summer season.
On the supply front, sellers disagreed and said that prices would firm. Although major Chinese end-users are able to fulfil short term requirements with domestic purchases, sellers argued that supply was tight because of regional turnarounds. Buyers agreed that this was true. Sellers also pointed to the increase in electronic futures pricing. Chinese prices are still depressed compared with southeast Asian prices and still have room to rise, sellers said.
A trader said he was short of cargoes in the region but did not want to enter the market as spot prices were much higher than what he could resell under his term contracts. End-users in southeast Asia are waiting to see the progress of the restart of Petronas’ plant and a possible resumption in supply (see production news).
Quite a number of cargoes were already committed to Korea and southeast Asia during the price run up in the previous weeks, traders said, explaining the decreased spot supply situation.
China’s Zhengzhou exchange has postponed its launch of methanol futures trading to the fourth quarter, which had initially been planned for June or July.
Some market participants pointed out there would soon be a wide gap between Iranian and non-Iranian cargoes in pricing once the turnaround at a major Iranian plant is completed. There was more demand for non-Iranian material because of payment issues. Hence the price uptrend might be short-lived, said a buyer.
Although import discussions had fallen, some Indian market participants said the decrease was not as sharp because prices in other regions are holding steady or becoming firmer.
Methanex has listed its methanol Asian posted contract price (APCP) for August at $470/tonne (€324/tonne), up by $50/tonne from July prices.
Southeast Asia
A 4,000 tonne cargo was reported sold at $390/tonne CFR Merak. There were rumours of a deal at $400-405/tonne CFR Indonesia for an end user, but this could not be confirmed. A trader was also heard to have purchased 5,000 tonnes from the Middle East for mid-August delivery, for distribution at Merak port.
A producer, which recently restarted production, is in the market looking for volumes amounting to more than 5,000 tonnes. The producer is said to have large backlogs of unfulfilled requirements in the months where its plant was not in operation.
Demand in Malaysia and Indonesia was expected to weaken in the next few weeks leading to Eid ul-Fitr.
India
Domestic prices tumbled drastically amid weak demand. Local parcels of 100-200 tonnes were traded at Indian rupee (Rs) 19.00-19.70/kg ex-tank, excluding countervailing duties in Kandla, down by Rs0.5/kg from last week. Prices were assessed as stable amid lower bids. Buying indications were heard at $350-360/tonne CFR India.
There were a large number of shipments arriving into India this week but these were booked earlier.
Sellers said Indian market participants were still in the market, as spot cargoes might work out to be cheaper than procuring under contracts at premium prices.
Some Indian market players said the domestic market had overheated as a few distributors increased offers too quickly to levels that buyers could not support.
A 10,000 tonne cargo was heard on offer at a floating point basis with a premium of 1.5%. A trader pointed out India prices were still fairly attractive as compared with prices in other parts of Asia.
Market participants all agreed that the fall in demand was more than the decrease in supply because of the turnaround of two Middle Eastern plants. Demand is expected to remain weak until the second half of September.
China
Discussions were heard done at $375-383/tonne CFR China for August delivery. Buying ideas were at $370-375/tonne CFR China, although indications inched up to around $380/tonne CFR China by Friday. Some deals for bonded warehouse cargoes were reported done at $380-385/tonne EXWH.
China prices have been increasing for the fourth consecutive week from the end of June from $343-345/tonne CFR China to current levels. Domestic parcels were traded at yuan (CNY) 2,920-3,100/tonne ex-tank, up by CNY60-120/tonne. Some sellers said that they could finally move some old product by reselling in the local market and recoup import costs and other logistical costs. However end-users said they were buying cautiously on a hand-to-mouth basis.
Offers on a floating point-basis were at a premium of 3%, with most deals concluded around at a premium of 2.4-2.8%.
Export discussions remained at $370-390/tonne FOB China. The arbitrage window remained closed, said traders.
South Korea
Prices rose on a deal done at $385/tonne CFR Korea. Other offers were heard on a floating point basis with premiums.
Korea distributers said they were covered for August and had no need to buy in the next month.
Demand might decrease around 20% in the summer season, said a distributer.
A trader said he was considering to sell a prompt cargo at $390-395/tonne CFR Korea.
Taiwan
Prices were increased on higher regional values. No deals were heard.
Production news
Malaysia’s state-owned oil giant PETRONAS restarted its 1.7m tonne/year No 2 methanol plant at Labuan in Sabah state this week and is running it at 50% but might shut it in August, said sources close to the company. Sources said the company found new gas fields but the construction of pipelines might take at least half a year. The company could not be reached for comment.
Brunei Methanol Co (BMC) is planning to begin a two-to-three week turnaround at its 850,000 tonne/year methanol plant at Sungai Liang Industrial Park in the second half of September.
Iran’s Zagros Petrochemical will restart Zagros II, its 1.65m tonne/year methanol plant at Asaluyeh, for a month of maintenance next week.
China’s Shaanxi Shenmu Chemical plans to restart its 400,000 tonne/year methanol line at Shenmu county in Shaanxi province around 10 August after it was shut for maintenance on 10 July. Shaanxi Shenmu is running its other 200,000 tonne/year methanol line at the same site at full capacity, said the source.
Freight rates
India to:
Southeast Asia: $30-33/tonne (10,000 tonnes)
Northeast Asia: around $35-37/tonne (10,000 tonnes)
China to:
South Korea: $20-25/tonne
Southeast Asia: $30-35/tonne
Iran to:
Southeast Asia: around $45/tonne
India: $38-39/tonne (10,000 tonnes), $45/tonne (around 5,000 tonnes)
China: $65-70/tonne
Middle East (excluding Iran) to:
China: $55-60/tonne
India: $30-35/tonne
Southeast Asia: around $50/tonne
Northeast Asia: around $60/tonne
($1 = €0.71)
($1 = Rs44.45)
($1 = CNY6.44)
This week on ICIS news ( www.icis.com ):
29/07/2011 00:22 US methanol contract prices almost reach 3-year high on outages
28/07/2011 12:02 China’s Qinghai Zhonghao to shut methanol plant on 1 August
28/07/2011 05:20 Methanex Q2 net profit nearly triples on strong methanol prices
27/07/2011 08:39 China’s Zhongyuan Petrochemical to restart Puyang units in late Sep
26/07/2011 10:06 China’s Ningxia Baofeng Energy plans 1.5m tonne/year methanol plant
