OUTLOOK ’14: Asia methylene chloride set to sway with feedstock

By Heng Hui

SINGAPORE (ICIS)–Asia’s methylene chloride prices – on an uptrend last year – are likely to fluctuate alongside feedstock prices in the first quarter amid stable supply and demand fundamentals, market participants said.

Prices of both methanol and chlorine feedstocks for the production of methylene chloride have risen in the last few months, leading to higher production costs, according to ICIS data.

Feedstock chlorine prices in China were at yuan (CNY) 700-800/tonne ex-tank Jiangsu at the end of 2013 from CNY150-300 at the start of last year, according to ICIS China. Jiangsu is a major chlorine market in China.

Similarly, methanol prices were in the range of $490-600/tonne (€358-438/tonne) CFR (cost & freight) Asia by the end of 2013, according to ICIS data, showing an average increase of $140/tonne in 2013.

In tandem drummed methylene chloride prices also increased by around $150/tonne to end at $620/tonne FOB China, while bulk parcels increased around $130/tonne to finish at around $500/tonne CIF India from June until December 2013, according to ICIS data.

Sources said that demand supply fundamentals of methylene chloride will largely remain stable in Asia, where consumption in 2013 was estimated at around 1.5-2m tonnes/year and is expected to remain the same in 2014.

Asia production is estimated at roughly 1.1-1.2m tonne/year while the rest is imported from Europe where the material has been banned since December 2010 because of carcinogenic concerns.

Most European cargoes of methylene chloride land in India, which is one of the two biggest consumers of the material in Asia -after China – but the biggest importer because of very small domestic production.

China is the largest consumer of methylene chloride in Asia but does not need to import the material because of its sufficient local supply. The country domestically produces about 800,000-900,000 tonnes/year, market sources said.

Industry sources said the market is expected to be slow in January, as demand is expected to be low during the Lunar New Year period, which falls at the end of January and the first week of February.

Some of the downstream refrigerant businesses might be shut for a month during the festivities, said many China-based customers.

India’s import prices of methylene chloride are expected to remain high since anti-dumping duties (ADD) were imposed late last year on products coming from South Korea, EU and the US, according to Indian participants.

Cargoes were currently discussed at around $500/tonne CIF India for January bulk shipments from Europe where prices were last assessed at $450-500/tonne FOB (free on board) NWE (northwest Europe), according to ICIS.

China, Taiwan, Japan and South Korea are the main suppliers of methylene chloride to southeast Asia, which does not have any facility to produce it.

Imports into Thailand had been largely stable month on month and likely to be stable year on year, according to statistics released from Thailand’s customs department.

Exports had also been less than 2,000 tonnes a month from Taiwan in 2013, indicating the chemical had not been widely used, according to market observers.

Methylene chloride is used as an auxiliary foam blowing agent in the production of low-density and soft polyurethane foams, which are mainly used for furniture, carpet bedding.

It is also used as a feedstock for hydrofluorocarbon 32 (HFC-32), which is used as a substitute for hydrochlorofluorocarbon (HCFC-22) in certain refrigeration applications.

Additionally, methylene chloride is used as a reaction solvent in a variety of pharmaceutical applications.

This sector is likely to see stable demand next year, market observers said.

($1 = €0.74)