FocusAsia methanol market shrugs off Malaysia supply disruption

30 July 2012 09:01  [Source: ICIS news]

By Heng Hui

methanol - liquid fuelSINGAPORE (ICIS)--Spot methanol prices in Asia are unlikely to move up by much as weak demand outweighs any impact from a recent supply disruption in Malaysia, industry sources said on Monday.

On 27 July, prices were assessed at $360-370/tonne (€292-300/tonne) CFR (cost and freight) SE (southeast) Asia and at $355-365/tonne CFR NE (northeast) Asia, stable from the previous week, according to ICIS.

A 660,000 tonne/year methanol plant operated by major Malaysian producer PETRONAS Chemicals Group (PCG) had to shut production on 26 July following a fatal blast and fire at a vessel loading methanol from the unit in Labuan.

Four of the 29 crew members of the ship were killed at the incident, with one still missing, ship owner MISC said in a statement over the weekend.

PETRONAS Methanol Labuan No 1 plant (PML 1) was taken off line as a safety precaution, while PML 2 – which has a bigger capacity of 1.7m tonnes/year – was allowed to continue operations, PCG had said.

A jetty in Labuan that supports the No 1 plant had been damaged by the blast on 26 July, shipping sources said.

“We are still investigating the situation and do not know when the restart [of PML 1] is,” a source from PCG said.

The firm’s PML 2 unit is currently running at higher rates as compared to last year’s erratic production, the source said, without providing the plant’s actual run rate.

The shutdown of PCG’s smaller methanol unit in Labuan has a limited overall impact in the Asian market, whose demand is estimated at more than 30m tonnes/year.

Asia is a net importer of methanol, with the Middle East as its major supplier.

Spot price gains in China – a major methanol importer in Asia – last week were largely driven by the futures market, which tracked higher energy prices. On 27 July, methanol prices in China stood at $360-362/tonne CFR China on 27 July, up $2/tonne from the previous day.

In the Korean and Taiwanese markets, buyers are not keen to procure cargoes given their current high inventory against weak demand, market sources said.

The fire-hit vessel Bunga Alipinia was supposed to deliver possibly around 30,000 tonnes of methanol to customers in northeast Asia when the blast occurred, market sources said.

The vessel was supposed to call at south and east China ports, before heading to Taiwan and then to Korea.

It was heard the cargo on the vessel was sold by two Japanese traders besides PETRONAS. The vessel loaded 15,000 tonnes of methanol from Saudi Arabia, while some volume will come from PETRONAS.

At the Labuan port in Malaysia on 26 July, some 6,000 tonnes of methanol had been loaded by PETRONAS on Bunga Alipinia when lightning struck the vessel twice at 18:30 GMT.

PETRONAS is continuing to supply to contract customers, having just sent out a ship nomination for cargoes to be loaded in the second half of August, one of its buyers in southeast Asia said.

Inventory from PML1 and PML2 are interconnected, and the plant has the option of diverting to other jetties when required, the PCG source said.

“We will not sell below $370s/tonne CFR Asia for August delivery, as selling below that would mean it is lower than our term prices,” a PCG source said.

($1 = €0.81)

Additional reporting by Nurluqman Suratman

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
Request a free ICIS sample report for the latest prices and development in the Asian petrochemical markets

By: Heng Hui
+65 6780 4359

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