North China methanol prices likely to be stable-to-firm in short term

05 December 2012 07:04  [Source: ICIS news]

SINGAPORE (ICIS)--Methanol prices in north China are likely to be stable-to-firm in the short term on the back of tight natural gas supply because of usage restrictions for winter, industries sources said on Wednesday.

Methanol prices were assessed at yuan (CNY) 2,030-2,630/tonne ($326-422/tonne) EXW (ex-works) north China on 1 December, down by CNY50-320/tonne from CNY 2,350-2,680/tonne EXW at the beginning of November, according to Chemease, an ICIS service in China.

As the weather in China grows colder, the government has imposed restrictions on natural gas usage to give priority to residential areas for heating purposes, followed by businesses and lastly the production industry, a market source said.

Some methanol units in north China have been shut or have their operating rates lowered in response to the feedstock natural gas shortage, a trader based in north China said.

Lanzhou Bluestar has shut its 200,000 tonne/year methanol unit at Lanzhou in Gansu on 1 December, and will restart it in February 2013 when spring arrives.

Huadian Yutianhua has been running its 610,000 tonne/year natural gas-based methanol unit at Yulin in Shaanxi at 70% capacity since 3 December, while Qinghai Zhonghao is operating its 600,000 tonne/year methanol unit at Golmud in Qinghai province at 75% of capacity, according to company sources.

It is estimated that about 5,000 tonnes or even 6,000 tonnes of daily methanol output will be lost in the domestic spot market, which will support the weak prices, another trader said.

However, the stable-to-firm price trend is likely to be short as downstream demand from the formaldehyde and dimethyl ether (DME) segments is expected to weaken from mid-to-late December, the trader added.

Formaldehyde is mainly used in the production of architectural and decorative sheet metals, which slows down towards the end of the year because of cold weather. DME is blended into liquefied petroleum gas (LPG) to make up China’s methanol fuel, but the fuel’s quality will be affected by DME due to the cold weather.

Domestic coal-based methanol units are operating normally and Huadian Yutianhua is planning to start up a 600,000 tonne/year coal-based methanol unit at Yulin in Shaanxi on 20 December, which will ease the tight supply, according to the trader.

 ($1 = CNY6.23)

Additional reporting by Mindy Liu

By: Viola Pan
+65 6780 4359

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