FocusChina exports methanol on rare opening of arbitrage window
22 July 2011 04:12 [Source: ICIS news]
By Heng Hui and Ken Yin
?xml:namespace>SINGAPORE (ICIS)--China has exported more than 30,000 tonnes of methanol to southeast Asia and South Korea since end-June, as sellers took advantage of a rare opening of window for arbitrage trades, market participants said on Friday.
A few more shipments can be expected to the ports of Indonesia and Vietnam in the coming weeks, with the window open for the first time in three years. For the major ports in southeast Asia, however, the arbitrage opportunity may have already disappeared this week, they added.
China is a major consumer of methanol, taking in shipments of 5.5m tonnes/year and has been among the highest-priced import market in Asia, virtually shutting its window to export the product since July 2008.
But methanol prices in other parts of Asia have been steadily climbing as supply of spot cargoes is extremely tight. Since mid-June, an estimated 300,000 tonnes production was lost from shutdowns and outages at major production facilities in Malaysia, Brunei, Saudi Arabia and Iran, they said.
Spot methanol bids were heard on Friday morning at $370-380/tonne CFR (€259-266/tonne) (cost & freight) SE (southeast) Asia and at $390-410/tonne CFR Indonesia, traders said.
China’s exported volumes were concluded at $353-365/tonne FOB (free on board) China, market sources said.
“We can ship to southeast Asia if there is a $25-35/tonne difference to cover freight and other logistical costs from Southeast Asia,” a China-based trader said.
Chinese sellers have been shipping out methanol stocks from bonded warehouses, which are easier to re-export since import tax and other applicable charges on the material have not been paid, market sources said.
For domestic methanol producers in China, however, export will only become an option if international prices were at least $380/tonne FOB China, market players said.
Within China, however, demand for methanol has not been very strong, but prices were being pulled up by rising values of the cargoes in the international markets, they said.
Downstream industries which use methanol include formaldehyde, acetic acid, methyl methacrylate (MMA), methyl tertiary butyl ether (MTBE), dimethyl ether (DME), and dimethyl formamide (DMF).
Downstream formaldehyde operations in China had been dampened by low plywood and particle board production during the rainy season.
In the formaldehyde sector, producers complained of restricted credit access adversely affecting construction projects, as the Chinese government is continuing with its monetary tightening policy to curb the continued spike in consumer prices.
Demand from downstream acetic acid production, meanwhile, is being hampered by turnarounds at domestic facilities, said traders.
Despite current weakness in the demand, China’s methanol requirement at 20m tonnes/year is still much bigger than its own production of the chemical.
Traders expect an easing of tight supply conditions in Asia as soon as the major methanol facilities come back on stream.
“Once the southeast Asian plants run normally or when the Middle Eastern plants come back on line, we will see better supply and we will no longer see these exports from China or India,” a seller in Southeast Asia said.
($1 = €0.70)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical ConnectionsBy: Heng Hui+65 6780 4359
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