Methanol Buyers Hold Back as Prices Decline: Traders Expect Further Corrections

Key Takeaways:

• Methanol prices have fallen by ₹0.5/kg in the domestic market, now at ₹25.50/kg (Ex-Mumbai) and ₹25.00/kg (Ex-Kandla).
• Domestic demand remains low due to reduced production from formaldehyde manufacturers.
• The bearish outlook in chemical market is expected to continue until the first week of November 2024.

Domestic Methanol Price Outlook

• Importers have reduced Methanol prices by ₹0.5/kg, bringing rates down to ₹25.50/kg (Ex-Mumbai) and ₹25.00/kg (Ex-Kandla) on 60-day credit terms. Meanwhile, traders are offering even lower prices at ₹25.25/kg (Ex-Mumbai) and ₹24.75/kg (Ex-Kandla) for advance payments with immediate lifting.
• Bulk transactions were not reported as several formaldehyde manufacturers have lowered their product prices and are operating at reduced capacity levels. This trend is expected to continue until the first week of November 2024 due to Diwali holidays. Some traders opined that these developments are likely to impact methanol prices further.
• Methanol prices in the domestic market have corrected by nearly 4% on a week-on-week basis.

Global Methanol Price Trends

• In the international market, CFR China Methanol prices have seen sharp corrections, driven by weak demand from both China and India.
• The following are the Methanol future contract prices for CFR China:
• 2H October: $290/ton (Down by $9)
• 1H November: $286/ton (Down by $8)
• 2H November: $287/ton (Down by $6)
• 1H December: $288/ton (Down by $6)
• 2H December: $288/ton (Down by $6)

Supply and Demand Factors in Methanol Market

• Methanol supply remains abundant due to poor offtake in September and October, driven by sluggish demand from key sectors like bulk drugs and formaldehyde manufacturers.
• Bulk consumers have adopted a wait-and-watch approach, given the sharp decline in Asian benchmark CFR China future contracts, which are showing a backwardation trend.
• Many buyers, particularly in the pharmaceutical sector, believe replacement costs will be lower and are therefore holding off on purchases. Inventory levels are accumulating at ports due to the slow pace of liquidation, and the market is expected to maintain a bearish outlook until the first week of November, according to one trader.
• India’s Methanol demand stands at approximately 250-260 kt/month. Domestic producers, including RCF, Vinati Organics, and GNFC, have a combined capacity of 37 kt/month. The majority of the country’s Methanol demand is fulfilled through imports.

Chemical Market News

• In the global energy market, crude oil benchmark WTI prices have risen by 0.88% to $70.65 per barrel, while natural gas prices have fallen by 1.38% to $2.34/MMBtu.
• Weilian Chemical has reduced operating rates at its Reformer and PX Plant. The Plant is located in Dongying, China with a production capacity of 1 Million Tons/Year.
• Fujian Refining & Petrochemical (FREP) has shut its Monoethylene Glycol (MEG) Unit for maintenance work. The Unit is located in Quanzhou, Fujian, China with a production capacity of 400,000 Tons/Year.
• Braskem has shut its Chlor-alkali Plant. The Plant is located in Maceio, Alagoas with Caustic Soda production capacity of 448,000 dry MT/Year and Chlorine capacity of 400,000 Tons/Year

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Expert Opinion: Strategic Procurement Recommendations

As per market experts, methanol prices will remain bearish until the first half of November due to lower replacement costs and weak downstream demand from formaldehyde resin and bulk drug manufacturers. Buyers are therefore advised to adopt just-in-time procurement strategies rather than building up inventories.