OUTLOOK ’11: Asia methanol to trade at tight $300-400/tonne range

31 December 2010 05:02  [Source: ICIS news]

By Heng Hui

SINGAPORE (ICIS)--Asian methanol prices may turn firmer next year, supported by steady growth in demand, but trading values will likely be locked in a tight range, industry sources said.

Prices may hover within the range of $300-400/tonne (€228-304/tonne) CFR (cost and freight) Asia in 2011, and would average higher compared to 2010, they said.

This year, methanol traded within the band of $200-410/tonne CFR (cost and freight) Asia to at average at $305/tonne, up about 33% from 2009, according to ICIS data.

Steady demand growth from traditional and non-traditional applications in the key China market should continue to nudge up prices in 2011, market players said.

China’s annual methanol demand was estimated at 18m tonnes, industry sources said.

Demand from traditional end-user sectors such as formaldehyde, acetic acid, 1-4 butanediol, mono methacrylate (MMA), methylamines, and chloromethanes was expected to be on a slow uptrend, they said.

The traditional end-uses accounted for about 80% of total methanol demand, while the rest if taken up by non-traditional uses, which were expected to require more methanol in 2011, market sources said.

Methanol is used as an alternative fuel substitute and as additives in making methyl tertiary butyl ether (MTBE), dimethyl ether (DME), and is used in gasoline blending – among its non-traditional applications.

In China, where there was abundant coal reserves from which methanol could be derived, the proliferation of new methanol-to-olefins facilities was also driving up demand.

Meanwhile, restocking activities in China might occur in early January as current inventories were low, which would provide a near-term boost to prices before overall trades slow down before the Lunar New Year festivities on 2-8 February.

China’s methanol inventory was at 300,000 tonnes in December, against the monthly average of between 400,000-500,000 tonnes, market sources said.

Chinese methanol plants, which ran at significantly reduced capacities averaging 40-50% for the whole of 2010 due to high production costs, might further cut output if methanol prices failed to trend up from December’s levels of $320-340/tonne CFR Asia, market sources said.

Production was also hampered by the redirection of feedstock natural gas to heating purposes during the winter season in China, as per the government’s mandate every year.

Meanwhile, the country would add more than 2m tonnes/year in methanol capacity in 2011, market sources said. China has an estimated methanol capacity of around 27m tonnes in 2010, industry sources said.

Outside of China, only one methanol unit was slated to start up – the 1.3m tonne/year plant in Damietta, Egypt, owned by Methanex.

Asian market players said they were not expecting much impact from China’s tariffs on imported methanol from New Zealand, Malaysia and Indonesia, since the country had not yet decided when it would start levying the finalised tariffs.

Methanol prices in Korea, Taiwan and Southeast Asia were likely to take the cue from the Chinese market, market players said.

In the Indian market, meanwhile, price movement would hinge on the frequency and quantity of Iranian shipments, market sources said.

The current methanol demand worldwide stands at more than 47m tonnes/year, with Asia taking around half of this share.

($1 = €0.76)

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By: Heng Hui
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