SINGAPORE (ICIS)--The Asian spot market for methanol saw continued decline this week, a trend that first started two weeks ago and is likely to stay for a while even though Chinese domestic and futures markets started recovering from 28 March.
The key Chinese market opened the week softer, with the methanol futures market closing weaker on 27 March.
However, domestic ex-tank prices in both east and south China rebounded on 28-29 March as the futures market recovered.
On 30 March, south China prices continued to firm, due to strong restocking activities but east China prices were stable-to-softer reflecting thin trading activities.
Import discussions in China were limited this week due to the volatile futures market and the resulting lack of price direction.
In addition, buyers did not have any urgent purchasing requirements hence most chose to be on the side lines.
Most China market participants remained bearish this week despite the recovery in the futures market due to less consumption from the methanol-to-olefins (MTO) producers in April.
A major MTO producer would likely delay its start up from late April to May while another major MTO producer should shut down one of its plants for up to a month for maintenance starting 31 March.
A third MTO plant was considering shutting down for a turnaround in April but nothing had been decided thus far.
“It was not surprising that these MTO plants chose not to operate in April as present feedstock methanol prices were too high for them to maintain a profit margin,” a trader said.
A common theme in the rest of the Asia Pacific this week was a lack of spot activity and buying interest due to the diverting of materials from China in search of better netbacks, and full inventories among most buyers for April.
In South Korea, a selling indication of $320/tonne CFR Korea was deemed competitive by most South Korea market participants.
“This is especially so compared to domestic prices which were currently at $370/tonne on an import parity basis,” a South Korean buyer said.
However, the South Korean coastal inventories were described to be full, leaving Korean importers unable to take in additional materials.
“Some of our suppliers whom we have contracts with are requesting us to take in additional volumes from elsewhere, and we are expecting spot prices to continue softening in the coming weeks, hence we are not active in the spot market this week,” another South Korean importer said.
Similarly, in Taiwan, buyers and distributors did not have the capacity to take in any more volumes.
Domestic prices softened rapidly from last week and were last heard at the equivalent of $310/tonne.
“Domestic buyers were bearish due to the softening in Chinese prices over the last few weeks and at the same time, sellers are in a panic mode, looking to sell more before prices fall further,” a Taiwanese trader said.
Hence, Taiwanese importers felt that while a selling indication of $310/tonne CFR Taiwan was reasonable this week, domestic prices might quickly fall below those levels by next week so they would still choose to remain side-lined.
The southeast Asia market was thinly discussed as most buyers were not interested in any April-arrival spot volumes, while it was still too early to begin discussions for May.
“As the spread between China and southeast Asia had been greater than the norm and coupled with a rapid fall in China prices in recently weeks, many producers and suppliers had sent their volumes to southeast Asia instead in hopes of a better netback,” a southeast Asia trader said.
Therefore, offers and selling indications at $325-330/tonne CFR SE Asia did not garner any buying interest.
Sellers refrained from any offer softer than that as it would likely not entice any additional interest.
Focus article by Kite Chong