Indian Methanol Market Corrects on Weak Futures and Increased Vessel Arrivals

Key Highlights

1. Price Trends and Domestic Impact
   • Domestic methanol prices corrected by ₹0.5/kg; Ex-Kandla, Mumbai, and Hazira quoted at ₹33.00++.
2. Supply and Demand Developments
   • Improved Iranian methanol supply supported by frequent vessel arrivals.
3. Key Market News
   • Natural gas prices dipped by 3.89%, aiding stable methanol prices in India.
4. Expert Insights
   • Increased supply and declining futures suggest further price corrections.

Methanol Price Trends: Marginal Correction Amid Weak Futures

• After a prolonged rally, domestic methanol prices experienced a marginal correction today, with a decline of ₹0.5/kg observed across key markets.
• The ex-works prices at major locations in India are as follows:
  Ex-Kandla: ₹33.00++
  Ex-Mumbai: ₹33.00++
  Ex-Hazira: ₹33.50++
  Ex-Vishakhapatnam: ₹36.50++
  Ex-Kakinada: ₹36.00++
  Ex-Kochi: ₹36.50++
  (All prices are on 60-day credit terms)
• Traders holding inventory are actively liquidating stocks as importers offer aggressively due to a steep decline in future contract prices.
  1. The price correction can be attributed to the following factors:
  2. Increased vessel arrivals and Weak downstream demand.
  3. Decline in the Asian benchmark future contracts.
• CFR China Methanol Futures Prices as follows :
  1H Jan 2025: $310/MT (down $9)
  2H Jan 2025: $310/MT (down $10)
  1H Feb 2025: $309/MT (down $10)

Weak Domestic Demand Balances Improved Supply

• Methanol supplies from Iran have improved compared to the previous month, supported by frequent vessel arrivals. Despite rising natural gas prices, Indian methanol prices remained stable due to subdued domestic demand.
• In India, demand from the pharmaceutical sector remains tepid, while the formaldehyde segment has shown a modest recovery this week. The overall sluggish demand has prompted importers to lower prices, driven by concerns over reduced replacement costs.
• Demand from amine manufacturers continues to reflect weak sentiment in the pharmaceutical sector. However, a key formaldehyde resin producer confirmed a slight uptick in formaldehyde demand compared to December.
• India’s monthly methanol demand is estimated at 240–250 kt, with domestic production capacities from major producers 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
• Replacement costs for January 2025 arrivals are softening in line with falling future contract prices. Formula-based importers are now accelerating stock liquidation to mitigate potential losses.

Global Market Updates: Key Developments in Methanol and Feedstock Prices 

• International Trends
  1. Natural Gas Prices: Dropped by 3.89%, now at $3.52/MMBtu.
  2. CFR China Methanol Prices: $310/MT.
• Plant News
  1. Kaltim Methanol Industri (KMI), Bontang, Indonesia: The plant, with an annual production capacity of 660 kt, initiated annual maintenance in late November 2024. Operations are expected to resume by mid-January 2025.
  2. Sinopec’s subsidiary, Sichuan Wei Chemical, has commenced construction of a polyvinyl alcohol (PVA) resin plant. The new facility will have a production capacity of 50,000 metric tons annually.
  3. INEOS Styrolution has announced an increase of €50 per metric ton for Polystyrene (PS) prices in Europe, effective January, compared to its December settlement levels.
  4. Lotte INEOS Chemical (LIC) has reduced the operating rate of its Acetic Acid unit to 90% of its full capacity starting January 1, 2025. Located in Ulsan, South Korea, the facility has a production capacity of 710,000 tons per year.

Expert Opinion: Market Sentiment Remains Cautious

• Methanol prices are likely to remain mixed in the short term, influenced by increased supply. 
• Buyers are advised to exercise caution before replenishing inventories, as the market anticipates further price corrections amid weak demand and declining future contract values.