Methanol growth in context of the global market

1. 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

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

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5. Platts methanol assessments

6. Market on Close assessment process

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 PGPI, methanol prices trend lower early 2014 Global methanol prices fail to correspond with the early 2013 peak in the PGPI Source: Platts

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

10. Asia methanol VS FOB Mid East LNG: some correlation 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 US methanol price rises and falls with gas

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

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

15. India methanol increasingly linked to Iran 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. 1. In 2011, spread fluctuates between a minimum-maximum range of minus $12/mt to $50/mt 2. CFR India-CFR China spread widens mid-2012 onwards, when India started purchasing more volume from Iran following sanctions

16. Domestic China methanol gap to CFR China widens Gap widens significantly end 2013- early2014 CFR China-domestic China on an import parity basis spread mostly stable 2013 average spread: $22.22/mt 2014 to date average spread: $55.02/mt 2012 average spread: $17.17/mt

17. China-SEA prices start to disconnect Spread widens to record-high at $135/mt on March 14 2014 Spread mostly stable, especially during entire 2012

18. China imports fluctuate with price shifts, domestic support (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 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) March 20: Spread peaks at $188/mt, offering firm margins for the arbitrage shipment Tight supply in Asia narrows price gap between Asia and the US, preventing volumes from being shipped westward

22. Asia methanol price versus FOB Rotterdam 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? • 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 2015. Kharg Petrochemical has a 1.4 million mt/year plant on top of its existing one, with volumes from H2 2016. Sources estimate varying new capacities in Iran, with one suggesting 6 million mt/year in total.

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

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

30. Thank you Ng Baoying Senior Editor, Asia Petrochemicals Phone: +65 6530 6588 Email: bao.ying.ng@platts.com Yahoo messenger: platts_asia_methanol