01 March 2013 09:10 [Source: ICB]
Positive data coming out of China makes industry players feel a sense of cautious optimism about demand recovery
Buying activities for methanol in Asia are expected to pick up, with prices likely to increase, as Chinese players return to the market after a week-long holiday, industry sources said on 18 February.
Spot methanol prices were assessed at $370.00-380.00/tonne CFR (cost and freight) China and at $365.00-380.00/tonne CFR SE (southeast) Asia, on 15 February, up by 7.1% and 3.5%, respectively, from the start of the year, according to ICIS.
China prices were unchanged from the previous week, while SE Asia prices rose by an average of $2.50/tonne over the same period.
LUNAR NEW YEAR EFFECT
Regional trades had stalled since the start of February as demand traditionally weakens in the weeks leading to the Lunar New Year, which fell on 10 February this year. Most countries in northeast and southeast Asia celebrate the holiday for up to two days, while China - which is the key methanol market in the region - was out for a full week from 9-15 February.
With manufacturing activities in China expected to be in full swing in March, the near-term outlook for methanol demand seems promising, as the country accounts for about 50% of global demand, industry sources said.
China imported 5.64m tonnes of methanol in 2012, and produced about 25m tonnes of the chemical last year, according to ICIS data.
Demand for methanol in Asia will also get boost from non-traditional uses, including as a raw material for olefins production and as fuel, market sources said.
Recent positive data coming out of China, which is the world's second biggest economy, also provide a basis for some cautious optimism about demand recovery. But industry players are still wary of the fragile macroeconomic environment, which will likely prevent methanol spot values from hitting $400/tonne CFR Asia in the near term.
Within the key China market, traders are uncertain over the spot price direction of methanol that domestic deals so far this year had been concluded on a formula basis, instead of on an outright fixed value.
Meanwhile, recent aggressive expansion in downstream capacities - such as in the acetic acid and methyl methacrylate (MMA), polyacetal or polyoxymethylene (POM) sectors - have failed to augment actual methanol demand so far this year, industry sources said, citing no real underlying demand.
Most of the methanol derivative facilities are currently running at reduced capacity because of oversupply, industry sources said.
Production in the major downstream formaldehyde sector has been low, weighing down on the overall methanol market in Asia. But higher methanol values elsewhere prevent suppliers in the region from bringing down their prices, industry sources said.
At present, it makes more sense for Middle Eastern methanol producers that sell to Asia to ship out volumes to Europe, they said.
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