Methanol Prices Soar Amid Supply Constraints and Weak Rupee

Key Highlights

1. Price Surge: Domestic methanol prices rose significantly, reaching ₹38.50++ per kg in key regions, spurred by limited vessel arrivals and unfavorable currency rates.
2. Supply Constraints: Shutdowns in Iran and other production facilities have led to tightened global methanol availability.
3. Demand Trends: Formaldehyde demand is recovering, while pharmaceutical and amine segments remain subdued.
4. Market Outlook: Prices are expected to remain bullish due to high replacement costs and potential price hikes in downstream products like acetic acid and VAM.

Chemical Price Analysis: Rising Trends Across Key Locations

Domestic methanol prices witnessed a notable rise this week by nearly ₹1/kg.  

The ex-works prices for key locations in India are as follows:  

• *Ex-Kandla*: ₹34.00++  
• *Ex-Mumbai*: ₹34.25++  
• *Ex-Hazira*: ₹34.00++  
• *Ex-Vishakhapatnam*: ₹38.25++  
• *Ex-Kakinada*: ₹38.00++  
• *Ex-Kochi*: ₹38.50++ (all prices on 60 days credit terms).  

Traders who hold inventory are currently holding the quotations as importers are not willing to open the prices for the brokers today.

The price surge is attributed to several factors:

• Limited vessel arrivals expected in January 2025.  
• Higher replacement costs, as spot and future Asian benchmarks are up and in contango.  
• The Indian Rupee against the US Dollar, reaching a historic low of ₹85.09.  

CFR China Methanol Future Contracts

• *2H Dec 2024 CFR China Methanol*: $297/MT  
• *1H Jan 2025 CFR China Methanol*: $304/MT  
• *2H Jan 2025 CFR China Methanol*: $304/MT    

Chemical Supply and Demand Challenges: Impact of Global Plant Shutdowns

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 for methanol manufacturers.  

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:  

• *RCF*: 7.26 kt/month
• *Deepak Fertilizers*: 8.33 kt/month  
• *GNFC*: 22.39 kt/month  
• *Vinati Organics*: 134 MT/month  

Although replacement costs for Jan 2025 arrivals remain high, the recent correction in futures prices may offer formula-based importers a competitive edge by reducing costs.  

Global Chemical News and Plant Updates

International Trends:  

Natural Gas Prices: Up by 0.15%, now at $3.43.  

*CFR China Methanol Prices*: $297/MT.  

Plant News:  

Sinopec's Ethylene Complex Tianjin, China: 
Annual methanol production capacity of 1.20 million MT. Began a turnaround on 13th November 2024.  

Sabalan Petrochemical, Asaluyeh, Iran:  
Announced an unplanned shutdown on 8th December 2024. The plant has a production capacity of 1.65 million MT/annum.  

Kaltim Methanol Industri (KMI)  Bontang, Indonesia: 
Announced annual maintenance in the last week of November 2024. Operations are scheduled to resume mid-January 2025. The plant has a production capacity of 660 kt/annum.  

Expert Opinion: Strategic Inventory Recommendations 

• 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 surge in acetic acid and VAM prices is likely to keep methanol on a bullish trend.  
• Buyers are advised to build inventories at every low as the market is very speculative in the current situation.