Despite Lower Futures and Iranian Supply Pressure, Indian Methanol Demand and Liquidation Stay Firm

Highlights

1. Methanol prices fell ₹0.50/kg despite tight inventory.
2. Kandla and Mumbai import offers at ₹27.00++ and ₹26.50++/kg respectively.
3. CFR China methanol prices continue to weaken.
4. Strong demand from formaldehyde and bulk drug segments.
5. 80% of Indian methanol demand met by Iranian cargoes. 
6. Prices may correct in late May due to incoming imports.

Methanol Prices Decline by ₹0.50/kg Despite Tight Inventories

• Domestic methanol prices fell by ₹0.50/kg, despite limited inventories and strong liquidation in the market. Import offers were reported as follows; (on 60-day payment terms)
  A. ₹27.00++/kg ex-Kandla
  B. ₹26.50++/kg ex-Mumbai
  C. ₹26.75++/kg ex-Hazira
  D. ₹29.00++/kg ex-Visakhapatnam
• However, trader-level quotations were slightly higher; (on 60-day payment terms)
  A. ₹27.50++/kg ex-Kandla
  B. ₹27.00++/kg ex-Mumbai
• In international markets, CFR China methanol futures continued to soften due to persistent inventory overhangs and bearish sentiment driven by concerns over US-China trade flows.
  a. H1 May 2025: $266/tonne FOB (down $4 week-on-week)
  b. H2 May 2025: $265/tonne FOB (down $4 week-on-week)
  c. H1 June 2025: $263/tonne FOB (down $3 week-on-week)
• The decline in methanol prices is primarily attributed to lower replacement costs for Iranian-origin cargoes and weaker performance in Asian futures contracts.

Steady Demand from Formaldehyde and Bulk Drugs

• Methanol supply remained steady through April 2025. However, market activity improved significantly after the first half of April as traders and bulk buyers actively covered inventories.
• Kandla witnessed strong liquidation last week, driven by increased demand from formaldehyde manufacturers and the bulk drug sector.
• Spot activity remains robust, with traders, MSMEs, and bulk buyers actively participating. Iranian-origin methanol continues to dominate the Indian market and is expected to account for approximately 80% of total demand, according to market participants.
• Demand from the formaldehyde segment remains steady, supported by seasonal consumption trends.
• India’s total methanol consumption is estimated at around 280 kt/month.
• Domestic Production Capacities (kt/month):
  i. GNFC: 22.39
  ii. Deepak Fertilisers: 7.26
  iii. Vinati Organics: 135
  iv. RCF: 7.36

Market News: CFR China Prices Slide Further Amid Trade Worries 

• Global upstream markets presented a mixed outlook:
  1. WTI crude oil rose by 2.79% to $58.72/barrel
  2. Natural gas prices increased by 2.01% to $3.62/MMBtu

Expert Insights: Price Correction Expected with Incoming Iranian Cargoes

• Methanol prices in India are expected to remain stable in the near term due to healthy liquidation and limited inventory levels. 
• However, a potential correction is anticipated in the second half of May 2025, with good volumes of Iranian cargoes expected to arrive. Current benchmark prices remain weak and continue to trade in backwardation.