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Www.icis.com Making sense of Methanol prices - a PRA view Yu Guo and Fahima Khail June 2014 IRIB International Conference Center, Iran.

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Presentation on theme: "Www.icis.com Making sense of Methanol prices - a PRA view Yu Guo and Fahima Khail June 2014 IRIB International Conference Center, Iran."— Presentation transcript:

1 Making sense of Methanol prices - a PRA view Yu Guo and Fahima Khail June 2014 IRIB International Conference Center, Iran

2 Agenda Trade flow & market review 2013-Q Asia methanol market brief & price drivers Market outlooks Asia Methanol Market brief Key price drivers Market outlooks India Methanol

3 Methanol US EU China South Korea ME Net exporters: Iran, Saudi Arabia, Oman, SEA producers, Net importers: China, Taiwan, Korea, Singapore, India, EU and US *Figures for the year of 2013 Malaysia Singapore Taiwan Import: 4,858kt Export: 772kt Source: market, KITA, IE Singapore Import: 120kt Re-Export: 12kt Import: 1,695kt Export: 423kt Import: 1,273kt India Net Import: 6,651kt Indonesia NZ

4 Supply situation in the key end-user market

5 Intra-region trade opportunities China – SEA arbitrage opportunities often appear

6 Factors affecting Methanol prices Domestic prices Futures prices Inventory level Local material availability Crude & Global Factors Key prices drivers for spot methanol (CFR China) prices

7 Domestic prices v.s. Import prices Key Chinese players often use local prices as benchmark Correlation coefficient = 0.93

8 Factors affecting Methanol prices Domestic prices Futures prices Inventory level Local material availability Crude & Global Factors Key prices drivers for spot methanol (CFR China) prices

9 Futures prices v.s. import prices Futures prices sometimes influence China market sentiment Correlation coefficient = 0.69

10 Factors affecting Methanol prices Domestic prices Futures prices Inventory level Local material availability Crude & Global Factors Key prices drivers for spot methanol (CFR China) prices

11 Inventory level v.s. import prices Inventory level in China drives/caps buying activities Correlation coefficient = 0.61

12 Factors affecting Methanol prices Domestic prices Futures prices Inventory level Local material availability Crude & Global Factors Key prices drivers for spot methanol (CFR China) prices

13 Overall supply in China v.s. import prices Actual supply/expected supply often affects sentiment Correlation coefficient = 0.34

14 Supply situation in the key end-user market

15 Domestic supply v.s. import prices How important is operating rates among local producers? Correlation coefficient = 0.54

16 Import supply v.s. import prices Import volumes and its prices Correlation coefficient = 0.60

17 Factors affecting Methanol prices Domestic prices Futures prices Inventory level Local material availability Crude & Global Factors Key prices drivers for spot methanol (CFR China) prices

18 Crude v.s. import prices Crude prices provide a price direction for the broader market Correlation coefficient = 0.39

19 Factors affecting Methanol prices Domestic prices Futures prices Inventory level Local material availability Crude & Global factors Key drivers for day-to-day spot prices: Methanol futures China domestic prices Key drivers for long-term price trend Supply Demand Key factors in monitoring spot methanol (CFR China) prices

20 End- users formaldehyde, acetic acid, 1-4 butanediol, mono methacrylate (MMA), methylamines, and chloromethanes China GDP growth estimated at 7% in 2014 and 6% in 2015 Demand from the traditional sectors is expected to grow in line with GDP Going forward

21 End- users MTO, fuel cells, DME, gasoline derived from methanol, as well as the blending of methanol into gasoline 9m tonne demand in China, year 2013 Expected growth rate in at 30-35% Demand from the non-traditional sectors is expected to gather pace Going forward Source: ICIS News

22 End- users Demand structure in China Source: ICIS China Traditional Average Growth Rate GDP Non-Traditional % Traditional Average Growth Rate GDP Non-Traditional Est 30-35% Demand Structure by Products (%) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% E MTO/MTP Methanol gasoline DME Other Conventional MTBE AA Formaldehyde

23 Source: ICIS China Going forward

24 With existing projects Projects approved/awaiting approval Over 2.6m tonnes/year MTO/P capacity has been launched Around 10m tonnes/year of coal-methanol-olefins projects approved Inner Mongolia Ningxia Xinjiang Heilongjiang Hebei Shaanxi Anhui Zhejiang Jiangsu Henan Shanxi Guizhou Source: ICIS China Going forward

25 Methanol in India – a closer look! Fahima Khail Markets Editor –June 2014 Tehran, Iran, 7 th or 8 th June

26 Agenda Market Brief Key Price Drivers Market Outlook India Methanol

27 Market Brief ICIS assesses prices in West Cost India Methanol consumption in India ~ 2 million tonnes/year  Imports to West Cost India million tonnes/year - Small part of demand met by 5 local producers - India largely depends on imports from Iran FY : imported so far until Dec 2013: 1.1m tonnes  0.77m tonnes from Iran = ~70% from Iran  248,845 tonnes from Saudi Arabia = ~20% from Saudi Arabia The rest from UAE, SE Asia, China etc. Source: India Ministry of Commerce & Industry

28 Application Two major end-use segments : chemical and energy Chemical: production of formaldehyde, acetic acid, di- methyl terephthalate (DMT) and a range of solvents Energy: blending component for tertiary butyl ether (MTBE), tertiary amyl methyl ether (petrol and methyl TAME) and di-methyl ether (DME)  formaldehyde sector bulk (more than 60%) of the consumption, used in laminate, plywood, carpeting etc.

29 Key Price Drivers External Drivers Market in China Market in SE Asia Plant and Supply conditions in Iran and Asia Internal Drivers Demand in India (end-use market, seasonality, India economy) Domestic market in India (currency fluctuations) Domestic production Vessel delivery

30 Market Overview Source: ICIS Pricing

31 Near-Term Market Trend Likely to remain bearish along with China and SE Asia Monsoon season in starting in June  lower demand for end-use product formaldehyde Continuous supply from Iran. Stable-to-soft end-user demand along with slower GDP growth in the country

32 Long-Term Market Trend continue to rely on Imports from Iran Methanol producers’ fight for gas with fertilizer, energy generation and gas exports The two fastest growing regions are SE Asia and India, driven by chemical demand. Increase in end-user demand

33 Contributors: Ken Yin (China methanol) Sam Liang (China methanol) Singapore editorial team

34 Yu Guo, Fahima Khail,


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