FocusAsia methanol prices seen firm on FM and tight supply

05 August 2010 09:34  [Source: ICIS news]

By Heng Hui

SINGAPORE (ICIS)--Methanol prices in Asia are likely to maintain an uptrend due to tight regional supply and a force majeure at Kharg Petrochemical Co's (KPC) 660,000 tonne/year plant in Iran, industry sources said on Thursday.

KPC declared the force majeure last week for August-September supplies, after its methanol unit was shut on 24 July following a deadly explosion in the plant's central boiler. Four employees were killed by the blast.

The company had informed its contractual customers about the force majeure, said a company source. 

KPC sold its product mainly in China, Korea and Europe, according to the source.

A distributor based in Asia confirmed that he had stopped receiving methanol supply from KPC, adding that he was currently supplementing his stock from other sources in the Middle East.

Methanol supply in Asia had tightened since mid-July, due to the limited availability of cargo from Iran on the back of increased sanctions against the country and also because of recent outages at some plants in southeast Asia, market sources said.

Malaysian state-owned oil major Petronas had declared a force majeure at its 2.36m tonne/year methanol facilities in Labuan on 16 July, while Indonesia’s Kaltim shut down its 660,000 tonne/year methanol plant in Bontang on the same day due to mechanical problems.

The tight supply had led to a $5.00-15.00/tonne (€3.80-11.40/tonne) rise in Asia's methanol prices since mid-July and market players said that they could rise even further. Methanol was trading at $250-255/tonne CFR (cost & freight) China/Korea on 30 July, according to ICIS data.

Traders and distributors had a mixed reaction to the force majeure and its impact on methanol price outlook.

“The impact of [Kharg’s shutdown] was not great, as demand in August was not good," said a distributor.

A major Korea-based distributor said that prices were on an uptrend for reasons other than KPC's force majeure, as the company's capacity was small in comparison to other suppliers.

However, a distributor that dealt in the key China market disagreed, saying it had a sentiment effect on Chinese methanol spot sales.

The market was already tight due to other supplies being cut, and together with this production halt, spot supply would dry up exerting upward pressure on the prices, another major Korean distributor said.

The impact would likely be more visible in the coming weeks, many market participants said.

Methanol is used in the production of formaldehyde, methyl tertiary butyl ether, acetic acid, methyl methacrylate and other chemicals.

Other methanol producers in the Middle East include Saudi Basic Industries Corp (SABIC) Sabic and Iran's National Petrochemical Co.

($1= €0.76)

For more on methanol, visit ICIS chemical intelligence
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By: Heng Hui
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