Speculation Drives China Methanol

By Malini Hariharan

Methanol continues to be an exception to the general weakness seen in Asian petrochemical markets.

Spot prices have crossed $410/tonne in the important China market and could remain firm for the rest of the year. Prices have risen by 11% in the last month.

Chinese speculators have been driving up prices as they expect the Zhenzhou Futures Exchange to introduce a methanol contract in October or November, explained Ken Yin, China methanol editor at Chemease.

Financial companies have started to gamble, buying Middle East cargoes which will take 3-4 weeks to arrive in China, Yin added. Stocks in shore tanks along the coast of China are now around 500,000 tonnes.

The strong buying interest has come at a time when spot methanol markets are tight as a result of plant turnarounds and outages globally. End-users of methanol such formaldehyde or acetic acid producers have so far been able to absorb the price hikes, but purchase volumes are said to be limited.

This is not the first time that expectations of an imminent launch of the futures contract have fuelled markets. The contract was due in March and then in June when markets experienced similar rallies.

But if the contract is introduced in the next couple of months there is a very good chance of prices climbing even higher until the realities of the health of the global economy dampens the speculative fever.

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