Asian methanol prices continue to be pressured by ramp up in production

Singapore (Platts)--26 Mar 2014 625 am EDT/1025 GMT

Asian methanol prices are expected to come under heavy downward pressure in April after a ramp up in production in Southeast Asia and an influx of Iranian-origin cargoes, trading sources said Wednesday.

Since the beginning of March, Asian methanol prices have fallen $115/mt to be assessed at $345/mt CFR China Tuesday.

Major producer Malaysia's state-owned Petronas, which has a production capacity of about 7,000 mt/day, came out as a competitive seller last week offering down cargoes in order to secure buyers.

Petronas was thought to have sold around 90,000 mt of methanol during March for delivery into China in the first half of April, and pushing out another 100,000 mt to the US Gulf Coast on favorable arbitrage economics.

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Petronas had not been seen as a seller this week with various sources saying this is due to tight vessel availability.

"Shipping is an issue. Most vessels are being used by them [Petronas] as they need to move out cargoes every day, [which are] all lined up until April and [they are] now already looking at May loading [vessel] fixing," a Singapore-based trader said.

According to traders, the total import volume of methanol into China in April is estimated to exceed 300,000 mt, with the vast majority expected to be of Iranian origin.

"For now, the Iranian market is quiet due to the holiday period. But next week we will see many sellers. We will see around 200,000 mt of product [fixed for] export from Iran in April [destined for China], two MR (vessels] will load over March 20-30. Sellers will be offering to China on a fixed price, but CFR China has to [be at a] discount to the domestic [methanol] price in yuan to compete," a China-based trader said.

The domestic methanol price in China is currently at Yuan 2,730/mt ($440/mt).

Sources said China's buying appetite was slow, with a few buyers testing the market for prices, acquiring small volumes on the expectation that sellers will come out to offer fixed price cargoes at competitive levels next week.

"Chinese buyers are expecting to see a further price drop. We are seeing some tentative offers from Iran, but buyers are reluctant ... sentiment right now is $330/mt," a China-based trader said.

--Vanessa Ronsisvalle;
--Edited by Irene Tang,

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