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Making sense of Methanol prices - a PRA view

Making sense of Methanol prices - a PRA view. Yu Guo and Fahima Khail June 2014 IRIB International Conference Center, Iran. Agenda. Methanol. Net exporters: Iran , Saudi Arabia , Oman, SEA producers, Net importers: China, Taiwan, Korea, Singapore, India, EU and US

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Making sense of Methanol prices - a PRA view

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

  2. Agenda

  3. 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 Import: 1,695kt Export: 423kt Net Import: 6,651kt EU South Korea ME Import: 4,858kt Export: 772kt China Taiwan India 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. 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. 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. 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. 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. 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. Key factors in monitoring spot methanol (CFR China) prices • Key drivers for day-to-day spot prices: • Methanol futures • China domestic prices 0.93 0.39 0.69 • Key drivers for long-term price trend • Supply • Demand 0.61 0.54-0.59

  20. Going forward End-users

  21. Going forward End-users Source: ICIS News

  22. 2014-2015Est 2009-2013 Traditional Traditional Non-Traditional Non-Traditional Average Growth Rate Average Growth Rate GDP 57.5% 30-35% GDP Demand Structure by Products (%) 100% MTO/MTP 90% 80% Methanol gasoline 70% DME 60% 50% Other Conventional 40% MTBE 30% 20% AA 10% Formaldehyde 0% 2005 2007 2009 2010 2015E Demand structure in China End-users Source: ICIS China

  23. Going forward Source: ICIS China

  24. Going forward • Over 2.6m tonnes/year MTO/P capacity has been launched • Around10m 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

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

  26. Agenda

  27. Market BriefICIS assesses prices in West Cost India • Methanol consumption in India ~ 2 million tonnes/year • Imports to West Cost India 1.4-1.5 million tonnes/year - Small part of demand met by 5 local producers - India largely depends on imports from Iran FY 2013-2014: 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 + 54% 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) samliang@chemease.com Singapore editorial team editorial.ap@icis.com

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

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