China Insight: Tight methanol supply lifts prices

05 September 2011 00:00  [Source: ICB]

Methanol prices in north China rose sharply in the first half of August from mid-July as a result of a spate of unit turnarounds and outages. However, the situation may change in the long term when several plants are brought back on line.

Methanol soared in late July because of elevated import prices, rising east China e-trading platform prices and prices of cargoes in coastal regions, together with impending planned turnarounds in August, in spite of weak downstream demand.

By August 2, prices in north Shaanxi and Inner Mongolia rose by CNY230-270/tonne from early July to CNY2,480-2,550/tonne EXW (ex-works), with highest level hitting CNY2,600/tonne. Prices settled CNY210-220/tonne higher in Shandong and Heibei.

Some producers in Inner Mongolia and north Shaanxi suspended offers owing to low inventories and tight availability.

Most sellers raised their offers or suspended sales in view of operational cutbacks caused by turnarounds and outages in early August. The overall output losses are estimated to total more than 100,000 tonnes in August.

Thus, market players are confident of seeing higher prices in the short term. Some sources report that it is not prudent for traders to buy higher-priced cargoes in the face of weak demand and soft prices in the downstream formaldehyde sector.

However, the formaldehyde industry is expected to step out of the low production season. Thus, prices may move up in view of the supply-demand situation.

By: Mindy Liu

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