Asia methanol may gain further; plant outages tighten supply

22 September 2016 05:24 Source:ICIS News

a bottle of methanol 22 September 2016

SINGAPORE (ICIS)--Import prices of methanol in the Asian market are expected to see further price upside in the near term as recent plant outages may lead to a tightening of regional supply, market participants said on Thursday.

The benchmark CFR (cost and freight) China prices firmed this week following an outage at a major supplier in the Middle East.

Iran’s Zagros Petrochemical shut its two methanol units - each with a 1.65m tonne/year capacity - on 15 September due to utility supply issues. The plants are expected to resume production by the end of this week.

At the close of trade on 20 September, spot prices were at $230-235/tonne CFR China, up $5/tonne at the low end of last week’s closing prices, according to ICIS data.

Higher bids at close to $240/tonne CFR China were also heard in the spot market for specific shipment dates but no further details were confirmed.

However, market participants said bids at that level were mostly of speculative nature, since the spread between physical and futures market is now attractive enough.

The futures prices for the dominant January 2017 contracts listed on the Zhengzhou Commodity Exchange settled at yuan (CNY) 2,083/tonne on 20 September. This has an import parity of around to $240-245/tonne, depending on arrival time, market players said.

Meanwhile, prices in the southeast Asian region were also under pressure to increase during the week.

Brunei Methanol shut its 850,000 tonne/year plant unexpectedly last weekend and the exact cause of the shutdown could not be identified at the moment, with no definite restart date.

In Indonesia, Kaltim Methanol Industri (KMI) is expected to conduct its annual plant turnaround in mid-October, further limiting availability of spot cargoes from regional producers.

This had changed the originally balanced-to-tight southeast Asian spot market, with some players left scrambling for material to fulfil their requirements, market players said.

Spot methanol cargoes are expected to be available at prices not lower than $240/tonne CFR SE Asia, and prices may shoot up to as high as $250/tonne CFR SE Asia in the near term, a level last seen December 2015, according to market participants.

Focus article by Yu Guo

Methanol CFR China 22 September 2016

Picture: A bottle of methanol (Source: VISUM/REX/Shutterstock)

By Yu Guo