Domestic Methanol Prices Surge Amid INR Low, Iranian Shipment Concerns

Chemical Price

• The price dynamics between Asian benchmark CFR China Methanol and downstream FOB China Acetic Acid have narrowed significantly, with both products trading at near-parity in the Chinese market.
• In India, domestic methanol prices witnessed a notable rise this week, despite the availability of high port inventories. This increase is largely attributed to a rebound in methanol futures contract prices.
• The ex-works prices for key locations in India are as follows:
  Ex-Kandla: ₹32++
  Ex-Mumbai: ₹32++
  Ex-Hazira: ₹32.00++
  Ex-Vishakhapatnam: ₹34.25++
  Ex-Kakinada: ₹34.00++
  Ex-Kochi: ₹34.00++
• Traders are quoting even higher rates for bulk purchases, particularly:
  Ex-Kandla and Mumbai: ₹32.00++
  Ex-Vizag: ₹34.50++ (60-day payment terms).
• The price surge is attributed to several factors:
  1. Limited vessel arrivals are expected in December and January 2025.
  2. Disruptions in Iranian cargo shipments.
  3. Depreciation of the Indian Rupee against the US Dollar, reaching a historic low of ₹84.84.
  4. Speculation over disrupted Iranian cargoes has heightened urgency among buyers, leading to increased bulk inventory bookings during the week.
• In the Asian market, methanol futures rebounded this week, supported by improved market sentiment and rising natural gas prices:
  1H Dec 2024 CFR China Methanol: $298/MT (+$4)
  2H Dec 2024 CFR China Methanol: $298/MT (+$4)
  1H Jan 2025 CFR China Methanol: $300/MT (+$4)

Chemicals Supply and Demand

• Methanol supplies from Iran have been severely impacted by multiple plant shutdowns, leading to tightened availability. Rising natural gas prices have further pushed up production costs.
• In India, demand from the pharmaceutical sector remains weak, but the formaldehyde segment showed modest recovery this week. Despite sluggish demand, importers raised prices due to concerns over supply shortages and an unfavorable USD/INR exchange rate.
• Demand from amine manufacturers has been subdued, reflecting the overall weak sentiment in the pharmaceutical sector. However, formaldehyde demand has slightly improved compared to November, as confirmed by a leading resin manufacturer.
• India's monthly methanol demand is estimated at 240–250 kt. 
• Domestic production capacities among major players are as follows:
  1. RCF: 7.26 kt/month
  2. Deepak Fertilizers: 8.33 kt/month
  3. GNFC: 22.39 kt/month
  4. Vinati Organics: 134 MT/month
• Although replacement costs for December arrivals remain high, the recent correction in futures prices may offer formula-based importers a competitive edge by reducing costs.

Chemicals News

• International Trends:
  1. Natural Gas Prices: Up by 0.59%, now at $3.47.
  2. CFR China Methanol Prices: Increased by $4, reaching $298/MT.
  3. FOB China Acetic Acid prices were at 300-305$/Mt.
• Plant News:
  1. Sinopec's Ethylene Complex in Tianjin, China, with an annual methanol production capacity of 1.20 million MT, began a turnaround on 13th November 2024.
  2. The Borealis PDH unit at Kallo, Belgium, shut down due to strike activity on 12 Dec 2024, Strike action prompted the firm to temporarily shut down 489,000 metric tons per year on-purpose propylene unit; does not anticipate a significant impact on the site’s PP plant.

Expert Opinion

• Methanol prices are likely to remain volatile in the near term, influenced by ongoing supply constraints from Iran and Russia and the impact of the depreciating rupee. However, a potential decline in acetic acid production due to higher conversion costs could exert downward pressure on methanol prices.
• Buyers are advised to closely monitor the price spread between methanol and acetic acid for better forecasting of future market trends.