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

2. Asia Methanol India Methanol Agenda
Trade flow & market review 2013-Q1 2014
Asia methanol market brief & price drivers
Market outlooks
Asia Methanol
Market brief
Key price drivers
India Methanol

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

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

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

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

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

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

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

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

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 Local material availability
Key factors in monitoring spot methanol (CFR China) prices
Key drivers for day-to-day spot prices:
Methanol futures
China domestic prices
Factors affecting Methanol prices
Domestic prices
Futures prices
Inventory level
Local material availability
Crude & Global factors
0.93
0.39
0.69
Key drivers for long-term price trend
Supply
Demand
0.61

20. Going forward
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
End-users
Led by formaldehyde at 23% of the total downstream application in year 2010 but is estimated to decrease to 14.3% in 2015

21. Demand from the non-traditional sectors is expected to gather pace
Going forward
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
End-users
Led by MTO/MTP, the percentage of downstream application is estimated to jump to 31.4% in 2015 from the 2.2% in year 2010.
Source: ICIS News

22. Demand Structure by Products (%)
Demand structure in China
Demand Structure by Products (%) 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005
2007
2009
2010
2015E
MTO/MTP
Methanol
gasoline
DME
Other
Conventional
MTBE AA
Formaldehyde
Traditional
Average Growth Rate
GDP
Non-Traditional
57.5%
Traditional
Average Growth Rate
GDP
Non-Traditional
Est
30-35%
End-users
Source: ICIS China

23. Going forward Company name MTO/CTO capacity Methanol capacity
PP/PE capacity
Estimated startup
Ningxia Coal Industry Group
500
0/500
Q3 2014
Yulin Energy, Shaanxi Yanchang Petroleum
600
1800
300/300
Baofeng Energy
1500
Q4 2014
Qinghai Yanhu
300
1000
170/160
Shaanxi Coal and Chemical Industry Group
700
300/400
Shenda Chem
400
200/200
Hengtong Chemical
N.A.
Fund Energy
165/165
Source: ICIS China

24. Going forward
Over 2.6m tonnes/year MTO/P capacity has been launched
Around 10m tonnes/year of coal-methanol-olefins projects approved
Heilongjiang
Inner Mongolia
Xinjiang
Inner Mongolia
Hebei
Ningxia
Shanxi
Ningxia
Shaanxi
Henan
Jiangsu
Anhui
Zhejiang
Guizhou
Projects approved/awaiting approval
2013
2015
With existing projects
Source: ICIS China 24

25. Methanol in India – a closer look!
Fahima Khail
Markets Editor –June 2014
Tehran, Iran, 7th or 8th 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 Internal 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 + 54% - 56% Source: ICIS Pricing
CFR W.C. India 315/tonne
CFR W.C. India 560/tonne
- 56%
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) kenyin@chemease.com
Sam Liang (China methanol)
Singapore editorial team

34. Yu Guo, guo.yu@icis.com Fahima Khail, fahima.khail@icis.com