FocusIndia methanol surges past $360/tonne on tight supply

14 July 2011 03:49  [Source: ICIS news]

By Heng Hui

Methanol is used to make formaldehyde, which is used in the manufacture of wood productsSINGAPORE (ICIS)--Spot methanol prices in India have soared to their highest level in more than seven months because of extremely limited spot supply, market sources said on Thursday.

Selling ideas were quoted at $360/tonne (€256/tonne) CFR (cost & freight) India – levels last seen on 26 November 2010, according to ICIS data.

Prices have been steadily rising over the past three weeks, racking up 11% of gains to an average of $350/tonne CFR India in the week ending 8 July, ICIS data showed.

Methanol inventories at Kandla port are very low, at just around 36,000 tonnes at the end of June, with expectations that stocks will fall further given few re-exports of the material from southeast Asia, market sources said. This compares with the usual inventories of about 60,000 tonnes at Kandla, according to traders.

The Middle East, which is a big methanol supplier to India, is currently short in supply as two huge plants in the region with a combined capacity of 3.35m tonnes/year are currently not operating.

Saudi Methanol’s 1.7m tonne/year Ar-Razi 5 plant in Al-Jubail was shut down last week because of technical issues, with the outage expected to last two weeks.

Zagros Petrochemical’s 1.65m tonne/year methanol plant in Iran is off line for maintenance that will last a month from 3 July.

Indian methanol prices may also be taking their cue from the southeast Asian market, where values are on a strong uptrend.

Southeast Asian prices were heard at around $385-395/tonne CFR southeast (SE) Asia on Thursday, unchanged from last week.

In India, domestic methanol prices were at Indian rupees (Rs) 20.50-21.00/kg (46-47 cents/kg) ex-tank on Thursday, market sources said.

Domestic prices have increased by a whopping Rs3/kg in a span of two weeks – something that has not happened since the middle of 2008, market sources said.

Gujarat Narmada Valley Fertilizers Co (GNFC), the biggest producer in India, is offering cargoes at a listed price of Rs22,000/tonne ex-tank, an increase of Rs2,000/tonne from last week.

However, other market players are sceptical about the sustainability of such strong methanol prices.

It is possible that distributors with huge methanol inventory may be bidding up the market, said a trader.

Other traders expect the price uptrend to end soon since downstream demand from the formaldehyde and methyl chlorides segments are seasonally weak in July and August.

The low demand will just balance out the current low supply, they said.

Methanol producers in India include GNFC, Deepak Fertilisers and Petrochemicals, and Rashtriya Chemicals and Fertilizers.

($1 = €0.71, $1 = Rs44.97)

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By: Heng Hui
+65 6780 4359



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