Rising Methanol Prices as Futures Signal Bullish Trends and Supply Risks Loom

Key Highlights:

1. Methanol prices rose across Indian ports, with Ex-Kochi reaching ₹38/kg, and CFR China futures for February 2025 up by $6/MT.
2. Bulk demand from resin and formaldehyde manufacturers is increasing, but production remains constrained by seasonal holidays.
3. Natural gas prices, a key methanol feedstock, have hit a two-year high, driving up replacement costs.
4. PETRONAS announced a plant turnaround, affecting 1.67 million MT/year capacity, potentially tightening the Asian methanol supply.

Chemicals Price: Methanol Prices See Immediate Hike Amid Rising Futures

• Methanol importers have increased prices by ₹0.25/kg immediately, following a nearly 2% surge in future contracts this week. The price hike comes as upstream natural gas prices hit a two-year high, reinforcing a bullish outlook for methanol in the near term.
• The contango structure in methanol futures suggests a sustained upward trend in pricing.
• Current methanol prices on a 60-day credit basis are as follows:
  1. Ex-Kandla: ₹33.25/kg ++
  2. Ex-Mumbai: ₹33.50/kg ++
  3. Ex-Hazira: ₹33.25/kg ++
  4. Ex-Vizag: ₹37.25/kg ++
  5. Ex-Kakinada: ₹37.00/kg ++
  6. Ex-Kochi: ₹38.00/kg ++
• In the Asian market, CFR China methanol future contracts have surged by $6/MT, primarily driven by rising feedstock natural gas prices and market speculation about potential sanctions on Russian and Iranian cargoes under the new U.S. administration.
• Futures contract prices for methanol are as follows:
  1. CFR China, 2nd Half Jan 2025: $309/MT
  2. CFR China, 1st Half Feb 2025: $313/MT
  3. CFR China, 2nd Half Feb 2025: $314/MT
  4. CFR China, 1st Half Mar 2025: $312/MT
  5. CFR China, 2nd Half Mar 2025: $312/MT
• Industry experts anticipate further price increases, as potential supply constraints from Russia and Iran could tighten availability in the Asian market, a leading indentor observed.

Supply & Demand: Asian Market Driven by Feedstock Costs & Sanction Speculations

• Currently, the methanol supply remains stable, with healthy vessel arrivals recorded this month. However, market participants closely monitor the evolving situation regarding possible sanctions on Iranian and Russian cargoes, which could impact future availability.
• With rising natural gas prices and elevated methanol futures pointing to higher replacement costs by February 2025, traders and bulk consumers are actively building inventories at every price dip. This has resulted in increased trading activity in the domestic market this week.
• Bulk demand has seen an uptick in January 2025, with formaldehyde and resin manufacturers actively participating in the market. However, production remains constrained due to the Pongal holiday period, according to a leading importer.
• India's methanol demand stood at approximately 240 kt in 2024 and is projected to rise to 280 kt in 2025. Notably, domestic producer GNFC, which previously depended on imports, is now fulfilling its captive requirements through in-house production, as per market sources.
• Domestic Methanol Production Capacities:
  1. GNFC: 22.39 kt/month
  2. Deepak Fertilizers: 7.26 kt/month
  3. Vinati Organics: 134 MT/month
  4. RCF: 7.36 kt/month

Chemical News: Inventory Building and Growth in Bulk Consumption

• PETRONAS Chemicals Group, a key methanol producer in Malaysia, announced a plant turnaround on 9th January 2025. The facility, which has an annual production capacity of 1.67 million MT, is expected to undergo maintenance, potentially impacting regional supply dynamics.
• TotalEnergies highlighted continued weakness in chemical and refining margins during Q4 2024. The downbeat performance aligns with recent outlooks from other industry players, indicating sustained pressure in the sector.
• Repsol reported narrowing petrochemical margins for Q4 2024, marking a decline over the past two quarters. While full-year margins showed a slight increase, it was from a previously low base, reflecting lackluster market fundamentals.
• The Maleic Anhydride market displayed varied trends in early January 2025 across key regions, with stability observed in Germany, while prices declined in the US and China due to shifts in demand and supply dynamics.

Global Commodity Market News

• WTI crude oil rose 0.66%, reaching $79.19/barrel.
• Natural gas prices declined by 2.76%, settling at $4.13/MMBtu.
• CFR China methanol benchmark prices stood at $309/MT.

Expert Opinion: Global and Domestic Production Updates Impact Supply Dynamics

Methanol prices are likely to remain volatile in the short term due to speculation around potential U.S. sanctions on Iranian and Russian cargoes and the firming up of natural gas prices and higher methanol futures. Additionally, increased inventory accumulation by traders and bulk consumers is expected to support price strength soon.