Chemical Profile: Asia methanol

17 May 2013 09:49  [Source: ICB]

USES
Methanol is mainly used to make three derivatives: formaldehyde, methyl tertiary butyl ether (MTBE) and acetic acid. It also has an outlet in fuel applications such as dimethyl ether (DME), biodiesel and for direct blending into gasoline.

Other derivatives are dimethyl terephthalate (DMT), methyl methacrylate (MMA), methylamines, chloromethanes and glycol ethers.

It also has many general solvent uses.

 
SUPPLY/DEMAND
Supply was largely consistent in the first quarter of 2013. Plants in the key China market had been operating at around 50-60%, while Middle Eastern production was heard to be operating at slightly reduced rates because of the redirection of natural gas for heating in Iran and maintenance at some plants.

However, chemical demand was weak and domestic end-users in China may be better off buying domestic material available on an ex-tank basis, as current prices are roughly on a par with imports, or even slightly lower in some cases, market sources said.

Recent aggressive expansion in downstream capacity - such as in the acetic acid, MMA and polyacetal or polyoxymethylene (POM) sectors - has failed to increase actual methanol demand so far this year, industry sources said, citing no real underlying demand.

Merchant buying of methanol in the methanol-to-olefins (MTO) facilities, however, has increased. This was probably a major reason for the overall stability of the market, participants said.

However, higher methanol values elsewhere are preventing 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, market participants said.

Southeast Asian supply was tight because of several regional maintenances and outages.

PRICES
Prices in Northeast Asia were fairly stable between June 2012 and April 2013, hovering at around $360-380/tonne CFR NE Asia.

However, prices in India dropped from around $340/tonne CFR India in September to $300/tonne CFR India as a result of the influx of Iranian cargoes during November and December 2012.

Tight supply to India because of reduced Iranian production resulted in a spike in domestic prices in March this year to Indian rupees 25-27/kg ($460-490/tonne) ex-tank and bids of more than $335/tonne CFR India.

Port inventories were described by distributors in January as low and set to be depleted.

Southeast Asia prices increased because of supply outages in the second quarter.

TECHNOLOGY
The majority of methanol is produced today from natural gas or coal. The two main processes are from synthesis gas (syngas) in a reformer and from methane by steam and catalytic autothermal reforming.

Another process uses coal, which is first reacted with oxygen and steam in a gasification reactor. Purified syngas is then compressed and fed to a reactor, where it is converted to methanol over a copper catalyst.

OUTLOOK
Market views are divided on the outlook. Some participants said supply will tighten in May amid scheduled plant maintenance, while others indicated there may be an overall balanced supply-demand scenario, given the prevailing weak demand in Asia.

In Asia, the current reselling of unused contractual material in the local markets at below import prices is expected to continue amid tepid underlying end-use requirements. Sellers maintained their offers as they had better netbacks in Europe or the US. Some discussions about cargoes re-exported from China to the US have begun.

Market participants also pointed out the spot market was only a fraction - possibly only 5% - of the actual market and that contract supply is fairly stable, unlike in 2012 when prices were influenced by the irregularity of Iranian shipments. This year, there were fewer variables as everyone had factored in the irregular shipments from Iran.


By: Heng Hui
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