SE Asia methanol price premium to China widens but treads warily

SINGAPORE (ICIS)–While the price premium of southeast Asia methanol to China has widened after hitting a historic low in early March, the spread is likely to mire in the low double-digit levels amid subdued southeast Asian demand and a slew of facility restarts in China.

(Source: Wu Hong/EPA/REX/Shutterstock)

The price spread between southeast Asia and China methanol prices, has strengthened to $16.50/tonne during the week ended 22 March, according to ICIS data.

A stronger price spread could bolster Chinese methanol shipments to Indonesia given that the arbitrage window has opened since mid-March.

However, the draw for Chinese arbitrage material into southeast Asia could be limited, since the spread, which rebounded from the level of $12/tonne during the week ended 8 March, remains a far cry from the record-peak of $43.50/tonne achieved in the week ended 22 February.

The current price spread is well below that of the typical fluctuated range of $30-35/tonne, as prices in southeast Asia barely crept up from the hefty losses registered in March. Prices in China, on the other hand, rose sharply in the same month.

Suffice to say, the slump in China methanol futures on 28 March could further widen the price spread.

Methanol prices in southeast Asia were assessed stable in the week ended 22 March at $315-320/tonne on CFR (cost & freight) basis, according to ICIS data.

Over the same period, methanol prices on CFR China basis rose by $1/tonne at the upper end of the range to $287-315/tonne while prices were down by $3/tonne at the low end of the assessment, the data showed.

“I don’t expect large fluctuations in spot prices for the near future,” said a market participant in southeast Asia.

Meanwhile, methanol prices in China could find some support after an outage prompted Chinese producer, Shaanxi Xianyang Chemical, to shut its 600,000 tonne/year methanol unit on the night of 27 March.

This came on the heels of China’s Shaanxi Yulin Natural Gas Chemical which shut its 600,000 tonne/year methanol unit this week as planned.

But, on the other hand, other Chinese producers will resume or have already restarted their methanol units, and this could offset the impact of the current maintenance shutdowns.

Qinghai Guilu Chemical  is due to resume operations at its 800,000 tonne/year methanol unit in Xi’ning, Qinghai, on 30 March. The unit was shut since late October last year.

Both Xinneng Fenghuang (Tengzhou) Energy and Luxi Chemical Group have restarted their respective methanol units following unexpected shutdowns.

However, Chinese domestic prices, which tend to track in tandem with Chinese methanol futures, may not necessarily respond to physical fundamentals in terms of demand and supply.

In southeast Asia, methanol price discussions remain unchanged this week amid a balanced market.

A major southeast Asia methanol plant successfully restarted on 14 March following an outage, while buyers have covered their needs either with recent spot purchases or via term shipments.

Spot demand in the non-main ports is stronger, especially from the Indonesian biodiesel industry.

Methanol has uses in making products including formaldehyde, methyl tertiary butyl ether (MTBE), acetic acid, dimethyl terephthalate (DMT), methyl methacrylate (MMA), biodiesel and gasoline blending.

Focus article by Kite Chong