Rising Methanol Prices Spark Bulk Buying—Will Falling Futures Bring a Price Correction?

Key Highlights

• Price Surge in Domestic Market: Methanol prices increased by ₹1.00/kg, with regional variations due to supply shortages and INR depreciation against USD.
• Disrupted Supply Chains: Iranian supply disruptions and plant shutdowns tightened availability, driving speculative buying and bulk inventory accumulation.
• Sectoral Demand Trends: While pharmaceutical demand remains weak, formaldehyde demand has shown marginal improvement, benefiting resin manufacturers.
• Global Price Trends: Asian methanol futures fell due to sluggish downstream demand in China, offering potential cost advantages for formula-based Indian importers.

Domestic Methanol Price Trends: Analyzing Recent Surges

• Domestic methanol prices witnessed a notable increase this week, rising by ₹1.00/kg, as importers adjusted their offers upward. The revised prices, based on 75 days payment terms with immediate lifting, are as follows:
• Ex-Kandla: ₹28.75++
• Ex-Mumbai: ₹29.00++
• Ex-Hazira: ₹28.50++
• Ex-Vishakhapatnam: ₹33.25++
• Ex-Kakinada: ₹33.00++
• Ex-Kochi: ₹33.00++
• Additionally, traders quoted even higher rates:
• Ex-Kandla and Mumbai: ₹29.00++
• Ex-Vizag: ₹33.50++ (on 60-day payment terms).
• The price surge is attributed to limited vessel arrivals, disruptions in Iranian cargo shipments, and the depreciation of the INR against the USD, which has reached a historic low of ₹84.70.
• Market speculation over disrupted Iranian cargoes has created a sense of urgency among buyers, resulting in increased bulk inventory bookings this week.
• Meanwhile, Asian benchmark methanol futures declined due to weak downstream demand in China:
• 1H Dec 2024 CFR China Methanol: $294/MT (down $6)
• 2H Dec 2024 CFR China Methanol: $294/MT (down $5)
• 1H Jan 2025 CFR China Methanol: $296/MT (down $5)

Supply Chain Disruptions: Impact on Methanol Availability

• Methanol supplies from Iran have been significantly disrupted due to multiple plant shutdowns, leading to tightened availability. Additionally, higher natural gas feedstock prices are driving up conversion costs, according to market participants.
• Demand from the pharmaceutical sector remains weak, while formaldehyde has shown some recovery this week.
• Despite sluggish demand, importers increased prices due to concerns over supply shortages and higher USD/INR conversion rates.
• Demand from amine manufacturers remains low, reflecting weak activity in the pharma sector. However, formaldehyde demand has seen a slight improvement compared to November, as noted by a leading resin manufacturer.
• India’s monthly methanol demand is estimated at 240–250 kt. Among domestic producers:
• RCF: 7.26 kt/month production capacity
• Deepak Fertilizers: 8.33 kt/month production capacity
• GNFC: 22.39 kt/month production capacity
• Vinati Organics: 134 MT/month production capacity
• Although replacement costs for December arrivals are expected to stay high, the recent correction in future contract prices may benefit formula-based importers by offering cost advantages.

Chemicals Market News: Demand Recovery in Formaldehyde

• Upstream Natural Gas Prices: Increased by 1.49%, now at $3.08.
• Downstream CFR China Methanol Prices: Declined by $6, settling at $296/MT.
• Sinopec Ethylene Complex, Tianjin, China: With an annual production capacity of 1.20 million MT, the facility began a turnaround on 13th November 2024.
• Celanese, Singapore: The plant, a significant producer of ethyl acetate (85 kt/year) and butyl acetate (60 kt/year), resumed operations in the third week of November 2024 following a mid-October shutdown.

Expert Opinion: Opportunities for Importers

Methanol prices are expected to remain volatile in the near term, driven by speculation over supply constraints from Iran and Russia, as well as the ongoing impact of a higher USD/INR conversion rate. However, the decline in future contract prices could exert downward pressure on methanol prices, offering relief to formula-based importers.