Global Methanol Pricing Comparison · production and imports. Coastal methanol inventories remain...

MMSA METHANOL MARKET WEEKLY

2016 © MMSA Pte Ltd. All rights reserved. All information in the Methanol Market Weekly™ is for the sole and confidential

use of the Client Company and any subsidiaries of that company which qualify. The client agrees to use reasonable care to

protect the confidential nature of the articles.

Global Roundup Oversupply in the Atlantic Basin continues, keeping US and European spot methanol markets depressed. China spot pricing remains firm. Spot methanol pricing in the US moved little on limited trade. European methanol spot trade was also scant, with values plunging further. The chart below shows US and European spot prices well below adjusted contract (i.e. contract less discount) values, leading contract postings down.

The preliminary February 2016 MMSA MNTR figure for the NEA/SEA region is USD 208.4 pmt, down USD 3.2 from January ’16, underscoring the slowdown in Asian methanol price falls. Asian contract transaction methanol pricing remains above US and European methanol spot pricing, with the arb from the US to China still open. As Atlantic Basin markets remain long, pressure on spot persists, taking down contract prices around the world as forecast. MTO economics, still disadvantaged to naphtha, remain cash positive thanks to improvements in olefins derivative markets. Until MTO buying in China absorbs spare Atlantic Basin molecules, spot pricing globally remains constrained between a close floor (China coal) and a close ceiling (MTO buying power). This condition looks to persist for months.

Methanol Pricing - Asia (USD per metric ton unless noted otherwise)

Country/Region Min Max

South Korea Spot, CFR Main Ports 2016 Contract MMSA NTR

January (Final) February (Preliminary)

205 215

219.3

211.3

Japan Spot, CFR Main Ports 2016 Contract MMSA NTR


205 210

216.8

211.0

Taiwan Spot, CFR Main Ports 2016 Contract MMSA NTR


205 210

215.5

209.0

Southeast Asia Spot, CFR Main Ports

2016 Contract MMSA NTR January (Final) February (Preliminary)

205 215

220.2

212.1

India Spot, CFR West Coast

180

185

China Spot, CFR Coast, Broad Spot, CFR Coast, No Sanction Spot, East China (CNY pmt) Spot, South China (CNY pmt) 2016 Contract MMSA NTR


203 205

1760 1750

208 208

1770 1760

207.2 206.7

Methanex APCP Feb 2016 255

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+86 139 1867 5415

Singapore: Wang Xiaoshu,

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Europe: Wolfgang Seuser, [email protected]

+49 6024 63 2001

Americas: Mark Berggren, [email protected] +1 425 576 0555

Volume 3 Issue 6 – February 5, 2016

Methanol Pricing – Europe and USGC

Current Week

€ pmt USD pmt

Europe 1€= 1.102667 USD

Contract FOB T2 Rot Q1 2016 265 292

Methanex - MEPCP Q1 2016 275 303

Spot FOB T2 ROT Jan’15 (Low/High) 155 158 171 174

USGC US cpg USD pmt

Methanex - US MNDRP 02-16 75 249

SCC - US MPP 02-16 65 216

Spot FOB USGC Feb ’15 (Low/High) 42.5 44 141 146

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Global Methanol Pricing Comparison

Methanol US Contract Index, Avg Realized Price FOB USGC USD/metric ton

Methanol US Spot FOB USGC USD/metric ton

Methanol West Europe Contract (T2), Avg Realized Price FOB Rotterdam USD/metric ton

Methanol West Europe Spot (T2) FOB Rotterdam USD/metric ton

Methanol NEA/SEA MMSA Contract NTR Weighted Region Avg. USD/metric ton

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2016 © MMSA Pte Ltd. All rights reserved Volume 3 Issue 6 – February 5, 2016


Major Operations – Global

Location/Name Size (ktpa) Est. Op Rate Comment Southeast Asia PML1, PML2 720, 1700 0, 70 PML1 planned maintenance to February 8th; PML2 restarted from unexpected outage February 1st BMC 850 90 Running smoothly KMI 720 100 Down for 2 days; restarted February 3rd Methanex (NZ) 900, 900, 500 95, 95, 100 Two Motonui lines restored to full operability; company expects to run at full rates

East/South China (Shandong, Shanghai, Jiangsu, Hainan) Shanghai Coking 150, 200, 450 100, 100,100 2 largest lines shut down July 8th - 25th for maintenance, now operational Yankuang Group 500 90 Restarted after one week maintenance outage Tengzhou Xinneng (ENN) 2x360 100, 100 #1 restarted from Sep 13th through Oct 8th technical outage CNOOC 600, 800 100, 100

Inner Mongolia Xinao Group (ENN) 600 90 Restarted from outage Oct 10th-15th Jiutai 1000 90 Restarted from outage that began Oct 22nd for 15 days Unichem 600, 400, 180, 150 0, 0, 90, 90 Shut down October 10th, 2014. Small plants restarted early December 2015 Ximeng (Donghua Energy) 600 70 Delayed a 20-day outage plan further Shilin Chem 300 0 Shut down October 24th – December 19th. Shut down May 26th for one month outage Datang Int’l (Duolun) 1680 50 Restarted from outage August 24th through Sep 20th Shenhua Baotou 1680 90 Raised operational rates Mengda 600 90

Northwest China (Shaanxi, Shanxi, XinJiang, Qinghai, Ningxia, Gansu) Shenhua Ningmei 1680 90 Shut down June 29th through July 23. Integrated MTP Shaanxi Yulin 430, 180 0, 0 Down from July 2014 Shaanxi Shenmu 400, 200 100, 100 Restart Shaanxi Xianyang 600 100 Restarted from one-week outage Oct 12th – 19th Guanghui 600, 600 100, 0 #2 down since end August 13th, 2014 Bluestar 200 0 Shut down September 1st 2014 Zhonghao 600 0 Shut down Oct 7th after outage August 2014 - Sep 2015 Geermu 120, 300 0, 90 #1 shut down, 2# restarted from outage July 14th 2014- mid Oct 2015 Yanzhou Coal 600 100 Shut down Oct 10th – Oct 25 Huating 600 100 Shaanxi Changqing 600 50 Reduced rates Tuha 240 0 Shut down April 18th due to better netback of natural gas to pipeline Ningxia Baofeng 200, 1500 100, 100 Guilu Chemical 800 60 Restarted from outage from Oct 13th 2014 through mid-October 2015. Tongmei Guangfa 600 0 Shut down for maintenance until mid/end August Yanzhou Rongxin Chemical 900 100 Restarted from 10 days outage late August following April 2nd - April 17th maintenance outage

Southwest China (Sichuan, Chongqing) Chongqing Chem & Pharma 850 0 Shut down one month for maintenance. Kingboard 450 0 Shut down July 25

th, 2014 on natural gas restriction

Vinylon 340, 730 0, 80 Running at reduced rates on natural gas restriction Lutianhua 400 0 Shut down September 1st, 2014 East Hope 300 100 Coal based, restarted after one week outage Koyo Chem 500 0 Natural gas based, commissioning facility

Middle East & Africa Kharg PC 660 60 Restarted from maintenance outage plan of 21 days beginning mid-November Zagros I, II 1650, 1650 0, 0 Shut II Friday for at least two weeks based on market situation. 45-day outage on I began January 16th Fanavaran 1000 80 EMethanex 1300 0 Facility idled on recent sabotage of natural gas pipeline through Feb minimally NOC (Libya) 330, 330 0, 0 Facilities assumed down AMPCO 850 100 IMC (Sipchem) 1050 0 6-week maintenance/upgrade November 1st -December 15th, 2015 Ar-Razi I, II, III, IV, V 770, 770, 935, 935, 1700 100, 100, 100, 100, 0 Ar-Razi V restart underway; original mid-January restart delayed. Maintenance started mid-December Oman Methanol Company 1050 100 Salalah Methanol Co. 1300 85 Restarted from a brief shut down due to preventive measures during cyclone

Americas Methanex Medicine Hat 600 100+ Company confirms MMSA assumptions of full rates after expansion utilizing spare CO2 Eastman 195 80 Stable operations OCI 700 95 LyondellBasell 620, 750 100, 100 Methanex Giesmar I, II 1000, 1000 100, 100 First facility experienced 5-day outage; now back on stream, Second facility now at full rates Fairway Methanol 1300 100 Production at full rates, commercial material shipping now Trinidad complex 7 lines 85 Nat gas curtailments ongoing Venezuela complex 3 lines 50 At most two of three facilities operational, gas supply upset suspected but not confirmed Methanex Chile I, IV 840, 1000 70, 0 Minimal production rates on one line with natural gas from ENAP arranged through April 2016

Europe and Russia BioMCN 500 0 Reported biomethanol production (monitoring) AzMeCo 450 0 Company says production ceased on poor economics Sibmetachem (Tomsk) 750 100 Operating at plan Togliatti Azot 500, 500 100, 100 Both lines now producing methanol Mider-Helm (Leuna) 600 100 Running to plan BP – Germany 300 100 Running with IMPCA specification product available RMF (Metafrax) 1000 100 Kikinda 150 100 Product only commercially available mid-November



Asia Asian methanol markets held ground ahead of the Lunar New Year (LNY), led by China, which firmed on stable MTO purchases and outages in Iran and Malaysia. Nevertheless, traditional derivative demand was tepid. The rest of Asia, despite lackluster demand, was stable. Major market participants remain engaged in 2016 contract discussions. Preliminary February ’16 MMSA contract methanol NTR figures (see chart, right), at USD 206.7 pmt for China and USD 212.1 pmt for SEA, are down 0.5 and 8.1 pmt versus prior month finals, respectively. Methanol prices in the region are being supported by cost floors, and will ride a fine line between those and affordability into MTO as LNY approaches.

China January PMI (49.4) was at its lowest level in over three years, reflecting expectations of economic contraction. Yet Chinese methanol prices remained stable and quiet ahead of LNY, underpinned by restocking, consistent MTO operations, and outages in the Middle East. Zagros shut down a second line “based on market situation” after shutting the first line last week (please refer to global operations table, page 2). Because Iran accounts for the majority of imports, the outages immediately impacted spot values. However, imports in February and March will recover with American product streaming. Major coal based producers continue to run consistently. Short term stability is supported by the cost floor, with further price falls limited. Yet MTO affordability remains challenged, limiting upwards price movement. MTO operations are running consistently. Import increments for February loading from the Middle East and America are underway; another 32 kmt was fixed from Trinidad to China this week. The appetite for most other refined product substitutes (esp MTBE and DME) continues to wane. DME demand slowed further, with spot prices softening. Traditional derivatives like formaldehyde and acetic acid remained in their

seasonal lulls. Gasoline demand remains steady. Apparent demand in the New Year continues to grow thanks to coal based production and imports. Coastal methanol inventories remain low as end-users restock (see chart, left).

Imported and domestic spot methanol prices in East China were CNY 1760 – 1770 pmt, ex-tank basis. South China prices were CNY 1750 – 1760 pmt, ex-tank basis. The Iranian bid - offer ranged between USD 203 – 205 pmt, CFR basis. One parcel was fixed at around USD 205 pmt, CFR basis. One spot formula deal was discussed at a 1.5 percent premium. For non-Iranian parcels, bid - offer remained at USD 205 – 208 pmt, CFR basis. One spot parcel was offered at USD 208 pmt, CFR basis. The USD price gap between CFR and domestic prices remains below normal levels. The weakened CNY helps support domestic market prices,



which could then lead to an increase in CFR values (see chart, right). Contract discussions for next year continued, with average price ideas slightly below 2015, given Atlantic basin oversupply and MTO affordability concerns.

The current state of MTO operations in China is summarized in the table on the next page. MTO operation rates remained at 81 percent. Shenhua Yulin (600 ktpa) continues to run at 90 percent. Xingxing (600 ktpa) reduced operation rates to 70 percent on economics. Ningbo Skyford (Fude) Phase II (300 ktpa) and Mengda (600 ktpa) startups remain postponed. CTO operation rates are 77 percent of nameplate. The chart below, left summarizes the current status of methanol based olefin production in China, again indicating steady and strong demand for methanol into MTO, with

room for improvement still.

Chinese methanol derivative prices held relatively constant as tracked in the chart below, right. DME demand continued to slow, with spot pricing falling as LPG CP tumbled by USD 60 pmt to USD 285 pmt (CNY 2440 pmt) for propane and by USD 75 pmt to USD 315 pmt (CNY 2665 pmt) for butane. South China DME producer Jovo (200 ktpa) was running at 50 percent of nameplate and plans to shut down Feb 4th; Jiutai (300 ktpa) remains shut. Overall DME nameplate rates slowed to 25 percent. Gasoline blending markets remain healthy as methanol remains affordable. Chinese MTBE continues to run at reduced rates, with MTBE prices falling. Formaldehyde and acetic acid softened on weak seasonal demand. Many formaldehyde plants have shut in South China for LNY. Acid operation rates were pegged below 70 percent

overall. Spot acid FOB (export) prices fell to USD 245 pmt, FOB basis.

Korea/Japan/Taiwan Korean methanol demand remains stable to firm following China markets. Spot markets remain quiet ahead of Chinese New Year holiday, with most covered by contract volume. The crude rebound and China markets supported spot pricing here. Major participants continue term contract talks, with discounts discussed. Demand for formaldehyde and MTBE remains stable. The acetic acid JV is running at full rates. Acetic acid spot prices fell to USD 300 – 310 pmt CFR. Formaldehyde operations remained at 70 percent in January. The Korean MTBE



industry continues to run near full rates, driven by strong domestic demand. Spot methanol prices were pegged at USD 205 – 215 pmt, CFR basis. Local prices were pegged at KRW 280 – 285 pkg on strengthening Korean Won. In Japan, markets were stable notionally, following the rest of Asia. Sentiment here continues to follow events in other Asian markets, with spot prices determined by pre-arranged formula. There has been little fundamental change in the industry here, with inventories increasing slightly because of oversupply regionally. Most derivative facilities are operational, and methanol demand remains very stable accordingly. The notional bid offer range remains at USD 205 – 210 pmt, CFR. Taiwanese spot methanol markets remained stable and quiet ahead of the 9-day LNY holiday. Major buyers have piled up comfortable inventories and work from inventory over LNY. Most derivatives are operating stably, although formaldehyde softened. MMA average operation rates remain at 90 percent. The Changchun acetyl facility is running at 75 percent rates, and the Formosa acetyl JV continues to run at full rates planning outage in March, benefiting from stable VAM and PTA operations. Acetic acid prices remained at USD 280 – 300 pmt, CFR basis, following China. Formaldehyde industry rates continue to run at 60 percent. LCY (250 ktpa) continued to run at 60 – 70 percent, benefiting from stable derivatives operations, while its plant in China mainland reduced operation during LNY. Shiny (50 ktpa) shut down February 1st for one month. Contract discussions are ongoing with discounts sought. In spot markets, no spot deal was detected, with bid - offer remained at USD 205 – 210 pmt, CFR, unfixed.

Southeast Asia Southeast Asian methanol markets stabilized on unexpected outages of major regional producers, as well as stabilization in Chinese markets. Spot markets remain muted before LNY as major participants remain engaged in contract discussions. Petronas product is covered by contract, on a discount basis. PML1 was shut down for planned outage until Feb 8. PML2 was restarted Feb 1 from unexpected outage. KMI was shut down and lost two days production, now running at full rates after

Company LocationMethanol

(mtpa)

Olefin

(mtpa)Start Up Operation Remarks

Shenhua Group Baotou, Inner Mongolia 1.8 0.6 2010 AugRunning to plan.Shut down 2014 Sep 5 for 2 month,with

integrated methanol.

Shenhua Ningmei Ningxia 1.67 0.5 2011 Apr Outage June 29 through July 23

Datang International Duolun, Inner Mongolia 1.67 0.5 2011 Restarted from outage Aug 24 through Sep 20. Previously

outage 2014 Aug 25 to 2015 Mar 6.April 6 through end June.Shaanxi Yanchang Zhongmei (Chinacoal) Yulin Nengyuan (Energy) Yulin (Jingbian), Shaanxi 1.8 0.6 2014 Jun

Running to plan. Outage early March through end March.The

methanol facility shut down 2014 Sept 12 through end October.

Zhongmei Shaanxi Yulin Energy Chemical Co., Ltd Yulin, Shaanxi 1.8 0.6 2014 July Restarted from maintenance outage and ramping up operation.

Outage October 28th through Nov, and Nov. 24th through end Shenhua Ningmei Phase II Yinchuan, Ningxia 1.8 0.6 2014 Aug

Running to plan.Startup 2014 Aug 27th. Shut down Oct 25 to Nov

10 for outage.

Ningxia Baofeng Energy Group Ningxia 1.8 0.6 2014 Oct Commenced olefin production November 3rd

Shaanxi Pucheng Clean Energy Weinan, Shaanxi 1.8 0.67 end 2014

Shut down unexpectely Oct 22 on pipeline problem. Outage Mar

21 through end Mar on injuction by environmental bureau.

Commenced commissioning 2014 Dece 5th and successful

startup Feb 4th.

Erdos Sanwei Chemical Co. Ltd Inner Mongolia 0.4 0.1 end 2015 Commissioning

Qinghai Salt Lake Industry Co. Ltd Golmud, Qinghai 1 0.33 2Q2016

Sinopec & Henan Coal Chemical Hebi, Henan 1.8 0.6 3Q2016

Gansu Pingliang Hua Hong Hui Jin Coal Chemical Co. Ltd Pingliang, Gansu 1.8 0.7 2Q2017

Mengda New Energy Inner Mongolia 1.8 0.6 Apr-16 Delayed startup by 2 months on water supply issue. Integrated

Methanol 600 ktpa, creating a 1200 ktpa demand to merchant Total Petrochemicals, China Power Investment Inner Mongolia 3.0 1.0 After 2017

Company LocationMethanol

(mtpa)

Olefin

(mtpa)Start Up Operation Remarks

Zhongyuan Petrochemical (Sinopec) Puyang, Henan 0.6 0.2 2011 Oct Restart from outage that began Oct 16 through Nov 7

Ningbo Fude Ningbo, Zhejiang 1.8 0.6 2012 4QMTO Running stable, PP reduced to 50 percent rates. Restarted

Oct 10 from outage which began Aug 26.

China Wison (Nanjing) Clean Energy Nanjing, Jiangsu 0.9 0.295 3Q2013 Shut down Sep 18th through 26 to change heater exchange.

Shandong Yuhuang Dongming,Shandong 0.3 0.1 2014 Sep Started their MTP late August

Shandong Shenda (Legend Holdings) Zaozhuang, Shandong 1 0.4 2014 Oct Running at 70 percent. Startup late November along with PP and

EO.Will run at 50 percent until EVA start Aug 8 2015Zhejiang Xingxing New Energy Jiaxing, Zhejiang 1.8 0.6 2015 Apr Reduced to 70 percent on economics, building PP for better

economicsShandong Yangmei Hengtong Chemical Co., Ltd Linyi, Shangdong 0.9 0.295 2015 June 28th Running at 70%. Commission since July 2015

Shenhua Yulin Yulin, Shaanxi 1.8 0.6 2015 Dec 15th Started up 2015 Dec 15

Ningbo Fude/DICP Licensee Changzhou, Jiangsu 0.9 0.3 2016 1Q under construction

Shandong Huabin Shandong 0.54 0.18 2015 3Q under construction

Ruichang Shandong 0.36 0.12 2015 3Q under construction

Lu Shenfa Shandong 0.6 0.2 2015 3Q

Dongrun Shandong 0.9 0.3 end 2015 under construction

Better Clean Energy Shandong 0.9 0.3 end 2016 under construction

Jiangsu Shenghong Group Lianyungang, Jiangsu 3.6 1.2 end 2016 Phase I 800ktpa,Company indicated end 2016

Jiutai Energy (Zhungeer) Co., Ltd Erdos, Inner Mongolia 1.0 0.3 2016

China Wison (Nanjing) Clean Energy Nanjing, Jiangsu 1.8 0.6 2017 Contruction to be commenced early 2016

Operational Integrated 14.1 4.7

Non-Integrated 7.3 2.5

Methanol-To-Olefins (MTO) ProjectsIntegrated Projects:

Non-Integrated Projects:



restart Wednesday night. Inventory remains at normal levels. BMC (850 ktpa) is running smoothly, with February delivery settled by contract. Methanex (NZ) has recovered from earlier mechanical issues with all facilities now expected to run at full rates. Contract discussions are ongoing, with discounts discussed.

Overall demand for methanol in the region slowed for traditional derivatives; Malaysia and Singapore demand will remain stable during LNY. Crude fluctuations continued to affect sentiment. Appetite for biodiesel remains weak, with diesel prices at record spreads below feedstock palm oil. Regional formaldehyde demand remains stable thanks to contiued plywood health. MTBE prices fell to USD 454 pmt, FOB Singapore, following crude. Major MTBE facilities are running stably. The BPPA acetic acid plant (535 ktpa) is running smoothly. Local acetic acid markets moved down to USD 300 – 320 pmt, CFR SEA. Other derivatives, including MMA, report mostly normal operations. In spot markets, one major buyer is still looking for cargo but no spot business was detected. Southeast Asia price remain stable, bid - offer remained stable at USD 205 – 215 pmt, CFR basis.

India

Indian spot methanol demand remains stable to weak. Overall markets remain balanced, as methanol supply is limited thanks to Iranian downtime. Contract discussions for Middle East product are ongoing, with flat or slight premia discussed. Formaldehyde operations slowed while acetic acid ops remain stable. Inventory levels remain below normal on the coast because of delayed import arrivals. Domestic prices remain at Rp 14.0 – 15.0 pkg, ex-tank Kandla and Rp 14.50 pkg, ex-tank Mumbai. In import markets, no spot deals were detected; the fixed bid - offer range was USD 180 - 185 pmt, CFR. The acetic acid markets were stable-to-soft on Chinese acetic acid market length. Several parcels of acid were offered from Southeast Asia and China, with the bid - offer between USD 280 – 290 pmt, CFR, unfixed.

Methanol Feedstocks China Coal – Spot thermal coal markets further stabilized; mines are shutting for LNY, and some weather induced shortages, particularly in South China, have had the net effect of lowering inventories in northern ports. For a change, four major coal enterprises (incl. Shenhua) increased February prices, and several large-scale coal companies increased port coal prices from January 21st. Nevertheless, industrial needs will wane during the holiday, and balance is expected to return. Near their floors, thermal coal prices will continue to drift sideways. The chart (right) shows cash costs for leading and lagging coal based operations; margins are lowering, and methanol price corrections remain limited.

US Natural Gas – Natural gas pricing sank after withdrawal from inventory as reported in the weekly EIA report came in just under expectations. Inventories now sit a significant 17.9 percent over 5-year averages (last week 16.3 percent). March ‘16 Henry Hub (LA) futures moved down as low as USD 1.964 per mmBTU Thursday after the EIA report issued. Hypothetical USGC methanol production cash margins for contract sales therefore improved somewhat (see North America section for details).

Europe Spot methanol values in Europe sank to € 155 – 158 pmt (USD 171 – 174 pmt) FOB T2 Rotterdam (week prior notionally € 169 – 180 pmt). Offers for February began the week at € 163 pmt, with one deal at € 158 pmt concluded. Later, a consumer bid € 145 pmt against an offer at € 158 pmt, with € 155 pmt agreed. Only these two deals became public. Given their contract commitments, consumers are largely unable to access low priced spot. Activity may lessen next week as a holiday transpires.

On the supply side, problems in the Middle East persist, led by the closure of both lines of Zagros. While this has no direct impact on European supply, spare cargoes from the Middle East will chase higher netbacks in Asia. The Ar-Razi V facility in Saudi Arabia in in the process of restart. In Qatar reports which have not been confirmed and are being monitored suggest the

http://ir.eia.gov/ngs/ngs.html



QAFAC facility is down (see global operations table, page 2). A bit of light on the sabotage affecting EMethanex (reported last week) emerged: An explosion on the GASCO pipeline supplying the Damietta operation took place, leaving no casualties, with restart details unknown. Yet notably, despite Middle East supply issues, methanol availability in Rotterdam and the Mediterranean remains steady, while concerns about Rhine navigability have ceased.

Methanol demand in Europe remains solid, despite worries about macroeconomics. Most derivative producers report continued steady pulls. With few exceptions, derivatives are reporting high production rates.

Formaldehyde operation rates were cited at “upper limits,” and MTBE sales for summer blending have begun, with operation rates near maximum. However, events in the biodiesel industry are less rosy. Not only are current energy prices a concern (low value in blends with diesel), a switch in policy (reducing greenhouse gas emissions rather than quotas for use) has reduced biodiesel demand. In Germany alone, biodiesel demand dropped by 0.41 million metric tons to 1.98 million metric tons in 2015 versus 2014.

The wide supply – demand gap in the Atlantic Basin persists. As mentioned last week, it is clear that spot pricing is well out of line with EU contract levels. In fact, consumers interest to enact a “special adjustment” to CP reduction has emerged. Given strong continued consumption of methanol, the impetus for sellers to comply with such requests is small. However, it is clear that CP will continue its decline next quarter and a protracted argument is likely. Forces supporting the drop include an oversupplied Atlantic Basin, further interest by Iran to supply the continent, and of course low energy prices, which have dropped methanol chain economics and have convinced buyers that purchases can be made without haste.

North America Conditions in US spot methanol transactions remain similar with the arb for spot trade to Asia marginally open. A few deals between 42.5 – 44 cpg (USD 141 – 146 pmt) FOB USGC for February (last week US 43 – 44 cpg) transpired. Such a slowdown in spot activity is typical after contract posting announcements. However, traders remain scrambling for spot molecules and spot vessel space.

North American methanol demand is somewhat mixed, yet overall flat. While some consumers are taking product at a brisk pace (formaldehyde), others, worried about about chain inventories, are slowing purchases. Acetic acid producers have indeed slowed chain purchasing until energy prices bottom, and will lower operation rates in the first quarter. On the MTBE front, Enterprise’s production facilities remain under turnaround after an unexpected outage, through February. Other MTBE production is expected to continue with no planned outages through

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European Methanol Prices(through Feb'16E)

Methanol West Europe Contract (T2), Avg Realized Price FOB Rotterdam USD/metric ton

Methanol West Europe Spot (T2) FOB Rotterdam USD/metric ton

Methanol West Europe Contract (T2) FOB Rotterdam Euro / Ton



th year. Interest in spot exports of methanol from the region to Asia remains high; using freight estimates, netback values in the USGC are roughly US 43.0 cpg (USD 143 pmt) for Asia. However, methanol continues to compete with aromatics for spot vessel capacity, which is unavailable until March. Changes in MMA offtakes are nominal. Biodiesel economics remain poor, hindering that sector.

Methanol supply to North America remains ample. Cash margins, although depressed after recent contract posting reductions, remain positive (see chart below). Therefore, methanol production in the USGC continues. Increased exports from the US to Europe and Asia, continued curtailments in Trinidad and Venezuela, and more movement from Trinidad to Europe and Asia continue (this week approximately 32,000 metric tons from Trinidad to China was fixed for 2H February loading). Nevertheless, the amount of trade remains for now a small portion of total Chinese imports, and even smaller part of Chinese demand. Unfortunately, such trade comes at a major penalty to revenue given the current spot methanol price levels in Asia.

Along with netback levels, US spot prices continue to move closer to USGC costs to produce. The chart on the left shows hypothetical USGC producer cash costs versus contract methanol pricing. Costs to produce methanol are largely impacted by (and consist of) natural gas pricing, and the cash cost to produce methanol (blue area) is a near proxy for natural gas prices. Given that contract pricing in the USGC remains well above spot levels, natural gas fed methanol operations continue to yield positive cash margins. Additionally, the recent drop in natural gas pricing has limited the pain of lowered contract methanol sales realizations, for now cushioning the drop in margins for USGC producers.

Consumers continue to look for spot, which remains priced well below contract net transaction levels even after February contract reductions. As spot prices descend near cash costs, momentum remains in the consumers’ favor. While MTO buying in China remains strong, and will help restore global balance as two to three major consuming facilities issue later in the year, MTO demand will only support increases in pricing that naphtha and olefins derivatives economics allow. As spot prices remain depressed, optional molecules from the Middle East and Americas will continue to swing further to Asia, helping keep Asian prices at the affordability of marginal buyers (MTO), and limiting price rises. In short, with the assumption of continued strong production from facilities serving the USGC, methanol prices will trade in a limited and lowered range in this region.

Freight – Liquid Bulk Global Estimates Middle East Gulf to: 10K mt 15K mt Singapore to: 10K mt USGC to: (Simple Chems) 5K mt

Far East 43.0 40.0 Ulsan 30.0 Far East 65.0

Rotterdam 67.0 63.0 Merak 19.0 Rotterdam 58.0

West Coast India 29.0 24.0 Thailand 19.0 E. Coast S. America 67.0

Singapore 31.75 27.0 Mid China 33.0

North China 37.0

(Spot, Stainless Steel unless noted otherwise, USD pmt, Dec ’15, Best Estimates, subject to variance)

Global Methanol Pricing Comparison · production and imports. Coastal methanol inventories remain...

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Transcript of Global Methanol Pricing Comparison · production and imports. Coastal methanol inventories remain...