Asian methanol markets showed a mixed trend during the week of August 15, with India experiencing a sharp price spike, China remaining under downward pressure, and Southeast Asia relatively flat as demand remained lackluster.
In India, methanol prices surged, following the U.S. sanctions against six Indian businesses that allegedly sourced Iranian-origin methanol. The sanctions restricted the supply of non-Iranian cargoes in the domestic market, which in turn caused a sharp price increase in the domestic market. Given the sanction risks, importers, indenters, and bulk buyers have largely avoided sourcing the Iranian-origin material, further tightening supply. According to market participants, shortages are likely to continue for another three months.
This runup has increased the conversion cost for downstream producers, such as Methanol-to-Derivatives Complex (MDC), and manufacturers of sodium methoxide. Importantly, methanol-consuming industry sectors are on alert for potential disruption and margin compression, including acetic acid, acetyls, methyl amines, and sodium methoxide producers.
In China, methanol prices fell week on week, pressured by oversupply concerns. Industry participants noted East and South China ports were expected to have inventories of around 1 million mt and would be oversupplied, compounded by limited tank space in coastal regions, further fueling a bearish sentiment.
Despite Iran's Bushehr 1.65 mln mt/yr methanol plant being offline, other plants were operating, and there has been an uptick in exports. August saw Iran's shipments of 700,000 mt, and continuing and expected shipments in September, although loading is expected to slow in the latter half of the month. Additional cargo loadings from non-Iranian sources strengthened the pressure on the coastal Chinese market.
On the demand side, most of the typical downstream customers were operating near full capacity. Acetic acid plant operators are trending higher while dimethylformamide (DMF) units are cutting runs. Most methanol-to-olefins (MTO) facilities are steady at most, and Sinopec Zhongyuan's MTO facility is slated to come back online. Although MTO demand is notionally going to rise, weak macroeconomic sentiment and rising inventories at ports have put downward pressure on methanol futures on the Zhengzhou Commodity Exchange, indicating waning bullish sentiment in the near-term.
Prices for methanol in Southeast Asia remained generally steady. Market activity was quiet and diminished as most downstream user requirements were covered by term contracts, leaving spot discussions soft. A number of downstream producers had squeezed margins and slowed their operating rates or announced provisional shutdowns due to the weak demand. Regional sentiment remained cautious, with a build-up of inventory in China and weak spot demand.
As per ChemAnalyst, it is anticipated that Indian methanol pricing will increase further because of supply issues, whereas China's market will likely remain under pressure due to high arrivals and start-ups of domestic units. In Southeast Asia, prices might soften a little in the near term because of slow spot demand of methanol and ample supply.
