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© 2013 Platts, McGraw Hill Financial. All rights reserved. Methanol growth in context of the global market Ng Bao Ying Senior Editor, Asia Petrochemicals.

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Presentation on theme: "© 2013 Platts, McGraw Hill Financial. All rights reserved. Methanol growth in context of the global market Ng Bao Ying Senior Editor, Asia Petrochemicals."— Presentation transcript:

1 © 2013 Platts, McGraw Hill Financial. All rights reserved. Methanol growth in context of the global market Ng Bao Ying Senior Editor, Asia Petrochemicals June 2014

2 Methanol in Iran Iran – key methanol producer Large natural gas reserves Important supplier to Asia Versatile product – traditional VS MTO 2

3 Agenda  Platts methanol assessments  Methanol prices versus energy prices  Asia methanol price trend  Global methanol trade flows  Competitive pressures from shale gas expansions  Downstream demand changes  Conclusion

4 4 Introducing Platts Platts is a commodity information and data provider founded by Warren Platt over 100 years ago, and owned by McGraw Hill Financial, a leading provider of ratings, benchmarks and analytics. Price ReportingAssessments Market ReportsBreaking News $!

5 Platts methanol assessments 5 Daily: CFR China, CFR Southeast Asia, Domestic China Weekly: CFR Korea, CFR Taiwan, CFR India Prices based on latest information sourced from the market, up to the close of the assessment window at 4:30 pm Singapore time. Cargo size: China, Korea 3-5kt. Taiwan, SEA, India 2-5kt. China domestic mt. CFR: Evaluate cargoes for delivery days forward from date of publication. China domestic: parcels loaded up to 10 days forward from date of publication. More information can be found on the Platts Petrochemicals Methodology Guide

6 Market on Close assessment process 6 Part of the price discovery process at Platts is the Market on Close assessment process. At 3:30-4:00 pm Singapore time on Fridays for methanol, Platts invites firm bids and offers from approved market participants. During 4:00-4:30 pm Singapore time, participants are allowed to increase or decrease their bids and offers. These price movements are tested by the market as they are open bids and offers. After 4:30 pm Singapore time, no new information will be accepted and the numbers on the MOC process will form an important basis for the final assessment of the day.

7 Agenda  Platts methanol assessments  Methanol prices versus energy prices  Asia methanol price trend  Global methanol trade flows  Capacity growth and downstream demand changes  Conclusion

8 Global methanol prices VS Platts PGPI: Not always in sync 8 Global methanol prices fail to correspond with the early 2013 peak in the PGPI PGPI, methanol prices trend lower early 2014 Source: Platts

9 Global methanol prices VS Brent crude: limited correlation 9 Global methanol prices fall despite stable Brent Global methanol prices rise despite stable-to-lower Brent

10 Asia methanol VS FOB Mid East LNG: some correlation 10 China methanol prices move in similar directions to LNG Prices move in different directions Prices move in similar direction

11 US methanol VS Henry Hub gas: some correlation 11 US methanol price rises and falls with gas

12 Asia methanol VS China thermal coal: some correlation 12 China methanol prices move closely with China thermal coal prices Coal, methanol prices fall in early 2014

13 Agenda  Platts methanol assessments  Methanol prices versus energy prices  Asia methanol price trend  Global methanol trade flows  Capacity growth and downstream demand changes  Conclusion

14 Asia methanol price trend 14 Asian methanol prices cluster and move in similar directions Common directionality evident end 2013-early 2014

15 India methanol increasingly linked to Iran CFR India-CFR China spread widens mid onwards, when India started purchasing more volume from Iran following sanctions 1. In 2011, spread fluctuates between a minimum-maximum range of minus $12/mt to $50/mt 3. India prices move closely with supply from Iran. Spread narrows end-2013 to early-2014 amid tighter supply from Iran. China prices don’t surge as much due to domestic supply.

16 Domestic China methanol gap to CFR China widens 16 CFR China-domestic China on an import parity basis spread mostly stable Gap widens significantly end early average spread: $17.17/mt 2013 average spread: $22.22/mt 2014 to date average spread: $55.02/mt

17 China-SEA prices start to disconnect 17 Spread mostly stable, especially during entire 2012 Spread widens to record-high at $135/mt on March

18 China imports fluctuate with price shifts, domestic support 18 (Units: mt. Source: Chinese Customs) *Includes also the countries that have been excluded from the list-up due to relatively small or sporadic volumes.

19 China-SEA prices start to disconnect 19 Methanol prices fall sharply at the start of 2014

20 Agenda  Platts methanol assessments  Methanol prices versus energy prices  Asia methanol price trend  Global methanol trade flows  Capacity growth and downstream demand changes  Conclusion

21 Asia methanol flows west amid healthy arbitrage margins (US) 21 Tight supply in Asia narrows price gap between Asia and the US, preventing volumes from being shipped westward March 20: Spread peaks at $188/mt, offering firm margins for the arbitrage shipment

22 Asia methanol price versus FOB Rotterdam 22 March 20: Spread peaks at $172/mt

23 Agenda  Platts methanol assessments  Methanol prices versus energy prices  Asia methanol price trend  Global methanol trade flows  Capacity growth and downstream demand changes  Conclusion

24 Will the west continue to be an outlet for Asia methanol? 24 Domestic production in China has been strong, supporting an open arbitrage US has been able to accept the surplus methanol in Asia so far Shale boom in the US may tip the scales Global methanol capacity growth led by US expansion

25 Upcoming new production In Iran, there are methanol projects slated in Chabahar, with a capacity of 1.65 mil mt/year. There’s also talk of volume from Kaveh, in Dayyar of 3.5 mil mt/year, by Kharg Petrochemical has a 1.4 million mt/year plant on top of its existing one, with volumes from H Sources estimate varying new capacities in Iran, with one suggesting 6 million mt/year in total. 25 CompanyCountryLocationSize (kt/year)When LyondellBasellUSTexas780end 2013 G2X EnergyUSTexas65Q Orascom Construction IndustriesUSTexasIncrease capacity by 175H Celanese/Mitsui JVUSTexas1300H MethanexUSLouisiana1000H OCI BeaumontUSTexasIncrease capacity by 182.5Q ValeroUSLouisiana1600Q MethanexUSLouisiana NatgasolineUSTexas1750late 2016 South Louisiana MethanolUSLouisiana1800Jan 2017 Northwest Innovation WorksUSWashington

26 26 Demand in Asia: China’s planned MTO projects Source: Platts Analytics

27 China’s MTO story: Risks Capital intensiveness Environmental issues Availability of water Availability of power Cost of delivering product to consumers Cost of methanol Source: Platts Analytics 27

28 Agenda  Platts methanol assessments  Methanol prices versus energy prices  Asia methanol price trend  Global methanol trade flows  Capacity growth and downstream demand changes  Conclusion

29 Conclusion Reduction in Asian methanol volumes headed west Supply to Asia limited apart from output from planned Iran projects China’s domestic production can displace import demand If Iran capacities come online as planned we may see more rebalancing Downstream demand growth in Asia seen in MTO projects, but unlikely that all will come on-stream 29

30 Thank you Ng Baoying Senior Editor, Asia Petrochemicals Phone: Yahoo messenger: platts_asia_methanol


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