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Argus Methanol

Formerly Jim Jordan & Associates Global Methanol Report

Issue 17-1 Friday 6 January 2017

Market Snapshot
Global prices
6 Jan December
US ¢/USG ± $/t ± ¢/USG $/t
US Contract Index - range 118.00-125.00 +10.50 392-416 +35 110.00-112.00 366-372
US Contract Index - wtd avg 121.80 +10.90 405 +36 110.90 369
Methanex MNDRP 125.00 +15.00 416 +50 110.00 366
SCC - US MPP 119.00 +7.00 396 +23 112.00 372
US spot - TX GC barge 6 Jan 104.25-104.25 +0.25 347-347 +1 30 Dec 103.00-105.00 342-349
23 Dec 104.00-107.50 346-357
16 Dec 101.00-104.00 336-346
9 Dec 98.50-100.50 328-334
2 Dec 97.00-98.00 323-326
US spot - TX GC barge wtd avg 103.17 343.04
USGC fob contract, non-discount 119.00-125.00 +11.00 396-416 +37.00 110.00-112.00 366-372
Truck/railcar ¢/USG ± $/t ± ¢/USG $/t
fob USGC 106.00-112.00 +7.50 352-372 +25 100.00-103.00 333-342
fob US northeast 108.00-111.00 +14.50 359-369 +48 94.00-96.00 313-319
fob US southeast 111.00-112.00 +7.00 369-372 +23 104.00-105.00 346-349
fob US Midwest 126.00-136.00 +13.50 419-452 +45 116.00-119.00 386-396
Canada C$/t ± $/t ± C$/t $/t
Western Canada distributor price 650 +75 492 +57 575 435
Asia-Pacific ¢/USG ± $/t ± ¢/USG $/t
cfr east China 100-102 -4.21 332-340 -14 93-108 310-360
cfr South Korea 107-110 355-365 98-110 325-365
cfr Taiwan 104-108 -0.75 345-360 -3 96-108 320-360
cfr southeast Asia 107-110 +3.01 355-365 +10 96-107 320-355
cfr India WC 95-98 +4.51 315-325 +15 81-93 270-310
Methanex APCP 129 +24.06 430 +80.00 105 350
China domestic Yn/t ± $/t ± Yn/t $/t
East China domestic spot 3,000-3,110 340-353 - 299-371
South China domestic ex-works 2,940-2,960 329-331 - 290-342
Europe €/t ± $/t ± €/t $/t
Europe contract 355 +107 375 +113 248 262
Methanex MEPCP 370 +120 391 +127 250 264
T2 fob Rotterdam spot 320-322 338-340 269-322 284-340

Copyright © 2017 Argus Media group


Argus Methanol Issue 17-1 Friday 6 January 2017

Industry equivalent

Europe
Timing $/t €/t ¢/USG
T2 fob Rotterdam spot 339 321 101.98
Europe contract 1Q17 375 355 112.78
US Methanex MEPCP 1Q17 391 370 117.54
Timing $/t €/t ¢/USG
US Contract Index Jan 405 383 121.80 Asia-Pacific
US spot - TX GC barge 347 328 104.25 Timing $/t €/t ¢/USG
Methanex MNDRP Jan 416 393 125.00 cfr east China 336 318 101.05
SCC - US MPP Jan 396 375 119.00 cfr South Korea 360 341 108.27
cfr Taiwan 353 334 106.02
cfr southeast Asia 360 341 108.27
World
cfr India WC 320 303 96.24
$/t €/t ¢/USG
Methanex Asia contract Jan 430 407 129.32
Global average 371 351 111.66

Global methanol prices (spot)


450 135
$/t ¢/USG

400 120

350 105

300 90

250 75

200 60

EU/Rotterdam, fob T-2


150 China, cfr 45
Southeast Asia, cfr
USGC, fob
100 30
Jan-15Apr-15 Jul-15 Oct-15Jan-16Apr-16 Jul-16 Oct-16Jan-17Apr-17

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Argus Methanol Issue 17-1 Friday 6 January 2017

Operations overview
Americas — “South America production begins the year at more normal levels. Trinidad pro-
duction continues to be exposed to natural gas limitations, likely through 2017. US production
runs well.”
„„ Trinidad continues to experience natural gas shortages—reportedly as much as 20-25pc for periods of time, but
may stabilize nearer 85pc supplies.
„„ All US gulf facilities said to be running well.

Europe/Russia — “West Europe/Russia methanol production runs well. Azerbaijan remains


down until perhaps spring.”
„„ Azerbaijan (540,000 t/yr) – Socar assumes ownership of unit but still yet to return to production.

Middle East/Africa — “E-Methanex Egypt looks to be operating. NOC Libya returns to opera-
tion after 2H December outage. Oman Methanol has restarted after incurring technical issues
in 1H December.”
„„ E-Methanex Egypt – The methanol unit is understood to be operating well and may have adequate natural gas into
the summer of 2017.
„„ NOC Libya (2 @ 330,000 t/yr) – Operating issues in 2H December, but returned to production as 2017 began.
„„ Zagros reports operating its two mega-units at 80-85pc rates.
„„ Fanavaran is operating its Bandar Imam-based unit at 80-85pc.
„„ Oman Methanol shut down in mid-December due to compressor problems. The unit restarted in early January but
may still be at reduced rates.

Southeast Asia/India — “Kaltim and Brunei running strong. Both Petronas units reportedly
running well, but market talk say the smaller unit may be at reduced rates and facing a shut-
down soon.”
„„ Brunei and Kaltim are running at capacity rates this week.
„„ Petronas reports operating its two units at 100pc at present. But there are talks the producer may have encoun-
tered technical issues at its smaller No.1 unit and hence was formed to reduce rates to about half. Petronas has
plans to take its No.1 smaller unit offline in August 2017 for a planned turnaround (expected to last up to 45 days)
but this timing may now be moved up.

North America
The first week of 2017 has been, as expected, mostly quiet. Consumers, traders and marketers all seem slow to
re-engage in significant activity. Most seemed interested in catching-up on China activities, which have pretty much
underpinned market strength in late 2016 and helped set the stage for January and Q1 posted price increases for
the Atlantic Basin.
Perhaps encouraging for the consumer side, China’s market prices retrenched from December highs this week
as fundamentals there continue to “reset” for 2017. However, a forecast for China’s market direction in the coming

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Argus Methanol Issue 17-1 Friday 6 January 2017

North America
weeks (if not months) is likely more difficult than other times.
Two new MTO units began production the last week of 2016, which (at capacity) adds 3.4mn t/yr of new metha-
nol demand. Industry supplies were already struggling to keep up with overall demand, excluding this huge step-
change. While timing remains elusive for the startup of major new methanol capacity this year, it’s probable the in-
dustry doesn’t see new capacity until 2H 2017. To keep up with not only the new MTO demand, but also the modest
growth expectations across the board of derivatives, current methanol production is going to have to perform much
better than history—and this could present quite a challenge. This imbalance has fueled speculation and the fly-up in
spot/contract methanol pricing.
This huge increase in methanol prices looks to be serving its purpose—that is to cause demand destruction. Meth-
anol demand usually slows in the winter and we see no evidence 2017 will be different (excluding MTO). For every
MTO unit, there is a unique set of economics, but generally, in today’s environment, those few non-integrated MTO
units (ethylene and propylene only) are living with negative margins. Even across the mix of downstream integrated
MTO units, margins vary but are very low. Today’s methanol prices in China are clearly challenging MTO operations.
Thus, the industry (price direction) is obviously going to be influenced by both supply and demand fundamen-
tals—with particularly emphasis on China. Current global supplies are not poised to keep up with robust MTO de-
mand. However, the current level of methanol pricing is too high for many in the MTO sector, which could drive
further reductions in MTO demand. In addition, olefin and olefin derivative prices are expected to decline in Q1 and
this further hurts MTO economics. Existing plus new MTO capacity demand for methanol is well higher as we begin
2017, but ultimate operating rates will determine whether there is absolute demand growth.
As a result, market prediction is simple. Global methanol supply/production reliability, timing of new methanol
capacity, China’s growing MTO demand (or perhaps decline), olefin and olefin derivative pricing and on a side-bar
China’s cash cost of production methanol are essentially the major inputs to accurately predict methanol market
direction and pricing. Along the way, region-centric issues are likely to arise as well to further complicate forecasts.
As always, it’s well poised to be a year of more forecasting misses than hits.
For the US, domestic and regional supplies are US MTBE production/net trade - '000 t
improved as the New Year begins. South America 300
production was vastly improved in December, Annualized Production: 1.6 mn t 1.7 mn t 2.0 mn t
but Trinidad natural gas limitations are expected 200
to linger through this year (at a minimum). The
Fairway LLC methanol unit will be offline in April, 100
but this is a site-wide shutdown which will also
see the shutdown of the acetic acid unit and the 0
net impact will be reduced. The new Natgasoline
methanol unit is expected to begin production in -100
2H 2017 and thus for the year the US will see in-
creased domestic production and a further reduc- -200
tion in imports. Net Exports

While estimates will continue to be refined, -300


Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct
it appears US methanol consumption in 2016 was 14 15 16
near 6.6mn t, up about 200,000t from 2015. This Production Net Imports/Exports

is mainly attributable to increased production of


MTBE and biodiesel, but most all sectors saw some
level of improvement. Biodiesel improved as blending regulations increase and were aided by the continued govern-

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Argus Methanol Issue 17-1 Friday 6 January 2017

North America
ment tax incentives. MTBE improved as “across US biodiesel production
the board” operations were better and the full
Million Gallons Million Gallons ('000 t)
year benefit of TPC’s expansion in early 2015. We 1,600 220 (732)
Annual Monthly
expect both sectors to grow in 2017 as well and Production Production
1,400 History/Forecast 190 (632)
likely lead overall methanol demand growth.
1,200 160 (533)
Market pricing
1,000 130 (433)
Methanol spot prices have been stable since mid-
December with limited activity in the market. At 800 100 (333)
the start of the week, bids were heard at 103¢/USG
for January and February delivery and held there 600 70 (233)

for most of the week. Offers were limited, but were


400 40 (133)
talked at 107¢/USG to 108¢/USG. The first deal of
the year did not take place until Thursday 5 Janu- 200 10 ( 33)
ary, when 104.25¢/USG traded for January delivery.

Mar
May

Sep

Mar
May

Sep

Mar
May

Sep

Mar
May

Sep
2013
2015
2013

2014

2015

2016
Jul

Nov

Jul

Nov

Jul

Nov

Jul

Nov
Based on the lone January deal during the
week, Argus will post the weekly spot methanol USGC methanol transactions
Timing Date Price - ¢/USG Volume - bls
price at 104.25¢/USG ($347/t; €328/t), up a meager January 05-Jan 104.25 10,000
.25¢/USG from the previous week.
Rail/Truck prices moved up after increases in USGC methanol spot & contract
January contract postings. US Gulf coast rail/truck 160 532
¢/USG US Spot; weekly avg. $/t
prices were confirmed between 106¢/USG and
Argus Index - 8%
112¢/USG, while Mid-continent prices were con- 140 466
Argus Index - 16%
firmed between 126¢/USG and 136¢/USG.
Argus Index
In Canada, Methanex announced its posted 120 399
price (Western Canada distributor price) at C$650/t
for January, up C$75/t from previous month. 100 333

WTI crude futures rose on 5 January in a vola-


tile session, after the US Energy Information Ad- 80 266
ministration (EIA) reported a larger-than-expected
draw in domestic crude stocks and swelling refined 60 200
product inventories.
Nymex February light, sweet crude futures 40 133
settled higher by 50¢/bl, to $53.76/bl. Prices Jan 15Apr 15 Jul 15 Oct 15 Jan 16Apr 16 Jul 16 Oct 16 Jan 17Apr 17

traded as low as $52.79/bl and as high as $54.12/bl


through the session. Ice March Brent rose by 43¢/
bl, to $56.89/bl. The March Brent-March WTI spread narrowed by 3¢/bl, to $2.21/bl.
US natural gas futures ended marginally higher on 5 January as market participants weighed near-term forecasts
for cold weather against a government report of a smaller-than-expected storage withdrawal.
Nymex gas for February delivery at the Henry Hub rose by less than 1¢/mmBtu, or 0.2pc, to settle at $3.273/
mmBtu. The 12-month strip increased by 0.4pc, to $3.301/mmBtu, while the 2018-calendar strip rose by 0.2pc, to
$3.04/mmBtu.

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Argus Methanol Issue 17-1 Friday 6 January 2017

Europe
Europe’s first week of 2017 interest in the methanol arena was nearly void Week Ending Methanol Price Range - €/t
of activity. Not all market participants have yet to return from seasonal Spot - Low High Avg $/t
holidays and those indeed in the office this week were spending significant 9-Dec 269.0 304.0 286.5 305.2
time managing contingency logistics, as low Rhine water levels continue to 16-Dec 305.5 320.0 312.8 327.3
23-Dec 320.0 322.0 321.0 335.9
create problems in the methanol supply chain for key consumers along the
30-Dec 320.0 322.0 321.0 339.1
river. 6-Jan 320.0 322.0 321.0 340.9

Consumer (methanol) inventory levels were likely already low given the
tight availability of product during most of December in the key terminals across northwest Europe, with several
inbound replenishment cargos into Rotterdam arriving only in the last few days of the year—later than originally
anticipated. Methanol marketers closely monitored contract customers methanol call-offs in December, given their
limited overall availability and the fact contractual selling prices would be increased sharply for supplies in Q1 2017.
In market discussion, those available this week were keen to understand the latest position on methanol supply/
demand in China, which clearly has been a major factor in the run-up in global pricing in the latter part of 2016.
Initial feedback seemed to point to less volatility, though details were rather limited.
Within this region it was confirmed methanol production in Libya (in latter part of December) was halted due to
technical difficulties. Operations resumed on 1 January and exports are due to recommence mid-month. After for-
mal ownership changes in late Q4 2016, the methanol unit in Azerbaijan is now operated by SOCAR. We understand
the unit has been offline since November 2016, due to limited supply of natural gas, but the company hopes produc-
tion can resume in the spring.
News of further increases in monthly posted methanol prices for both Asia-Pacific and the North America markets
for January 2017 was also a discussion topic among consumers who had already been informed of a sharp increase
in the European Quarterly Contract Price for Q1 2017 (compared with Q4 2016). Based on pricing levels for January,
it appears Europe remains the “cheapest” region for contract methanol pricing. Purchasing managers consistently
remind suppliers they need to remain competitive in an ever increasing global market for methanol’s downstream
derivatives.
Feedback on overall demand was limited this
week, which was not surprising so early in the New Europe methanol spot & benchmark
400 444
Year. However, we did hear from the market of a €/t $/t
force majeure on formaldehyde, which was said to
have been announced by a major European produc- 350 389

er. We were unable to receive clarification directly


from the producer concerned, but did hear from a 300 333
number of separate sources. The major integrated
chemical production site had issues in early Octo- 250 278
ber following an explosion/fire.

200 222
Market pricing EU Benchmark

As noted above, lack of players and/or activities in EU Benchmark - 10%


150 167
the spot methanol market over the course of this EU Benchmark - 15%
EU Spot; weekly avg €/$ @ 0.9
shortened work-week for most in the region of-
100 111
fered no change in the spot market assessment. Jan 15Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17Apr 17

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Argus Methanol Issue 17-1 Friday 6 January 2017

Europe
Bid/offer levels for January lifting were heard throughout the week in the €318-326/t range, but nothing was
concluded best we can gather. There was a single P&C transaction said to have been done mid-week, for a February
barge lot, at €325/t, typical Rotterdam terms.
In the absence of any confirmed spot transactions for January lifting, Argus will post this week’s methanol spot
price range, unchanged, at €320-322/t, fob Rotterdam T2 basis (nominal $340-342/t, 102.5¢/USG).

Asia-Pacific
Market summary Asia methanol prices - $/t
Two new China MTO units started up, almost at 450

the same time, in the last week of 2016, adding on Methanex APCP
China Spot, CFR
additional 3.4mn t/yr methanol demand at capac- 400
Korea Spot, CFR
ity. For the industry in total, no new (incremental) Taiwan Spot, CFR
methanol capacity is expected until 2H 2017. This 350 S/E Asia Spot, CFR
means rest-of-world methanol production will have India Spot, CFR
to preform much better, or incremental high-cost
300
China production will have to step-up to fill the
void.
250
On the other side of the coin, current high
methanol prices have pushed MTO production
200
margins into negative territory for some, result-
ing in rate reductions. The balance (or imbalance)
150
between olefin and olefin derivative pricing,
Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17
methanol pricing, MTO operating rates and global
industry methanol supply/production are expected
to be the primary drivers in the methanol space for many months.
China’s expected higher appetite for methanol has clearly pulled some 2017 term supplies away from those previ-
ously offered to other Asia-Pacific regions. China buyers are now looking at paying higher premiums (2-3.5pc) against
others to compete for limited supplies.
The recent diversion of trade flows have tightened supplies to India, southeast Asia, South Korea and Taiwan,
causing spot price “hikes” in southeast Asia and India this week, as well as largely steady prices in South Korea and
Taiwan, regardless of softer price levels in China.

China
Spot methanol prices surged as 2016 ended, but the beginning of 2017 sees a more mixed picture, with spot prices
now slipping. General supplies do not seem to be as abundant as some typical past spot avails have been converted
to term supplies for new MTO producers. Market talk this week of Oman and Petronas plant issues are also pointing
to a further tight supply stance. Some 2017 term contracts, for Middle East origin cargoes, were heard concluded
mainly in the range of 2-3.3pc range, with the low end referencing Oman and Saudi material, while the higher end is
tied to Qatar and Iran origins.

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Argus Methanol Issue 17-1 Friday 6 January 2017

Asia-Pacific
Spot offers were quoted at $245-250/t this China methanol pricing
week, cfr China basis—down as much as $20-25/t 3,500 500
from 2H December levels—but buyers were hesi- Yn/t cfr, $/t
Equivalent price = China domestic
tant to deal with domestic prices also falling. At price less terminal costs, less
VAT, less duty; converted to US$
the close of the week, a deal was concluded at 3,000 and represents the competitive 400
$232/t between a trader and a major MTO produc- price for import product.

er, for a 10,000t Iran cargo arriving in February. On


2,500 300
a floating price-basis, offers were initially placed at
premiums of 4-4.5pc, but these targets slipped to
3.5-4pc towards the close the week. Domestic spot
2,000 200
methanol prices saw similar trends this week, with
trading prices opening at highs of Yn3,000-3,110/t,
ex-tank Jiangsu, before slipping to the Yn3,000- 1,500 Domestic Yn China 100
3,030/t range Friday. Equivalent cfr China
Posted cfr China
Port inventory levels are a good illustration
1,000 0
of continued tight supply and some spot volumes Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17
now converted to term supplies. China’s coastal
inventories have been falling for three consecutive China methanol inventory vs domestic methanol pricing
weeks since late December. Inventory withdraw- 1,200 5,500
'000 t Yn / t
als are mostly from east China’s Jiangsu province, 1,100 5,000
where two new MTO complexes are located. 1,000 4,500
Jiangsu stock level, not including Jiangsu Sailboat’s 900 4,000
factory inventory, dropped to 242,000t this week, 800 3,500
almost half of the volumes seen in early Novem- 700 3,000
ber—before new MTO stock-ups. 600 2,500

Two new MTO plants started up together, in 500 2,000


the last week of 2016, adding as much as 3.4mn t/ 400 1,500
yr of additional methanol demand (at capacity). 300 1,000
While the smaller of the two is ramping up opera- 200 500
tions, the larger one was shut down after running 100 0
for two weeks as its derivative units are not yet Jan- Mar- Jun- Sep- Dec- Feb- May- Aug- Nov- Jan- Apr-
15 15 15 15 15 16 16 16 16 17 17
ready for start-up. Steady, full time operations, for East Coast Inventory Zhejiang Inventory
the larger MTO unit is not expected until the March South Inventory Domestic Methanol Price
timeframe (when derivative units are expected to
be operational).
While the new MTO capacity has boosted China methanol demand, demand from the more traditional, particu-
larly from chemical applications, is seen in decline this week—negatively impacted by methanol prices and the fast
approaching Lunar New Year holiday. While the official holiday is from 27 January to 2 February, most companies
tend to wrap-up business from the third week of January and fully resume operations only from the second week of
February.
As noted, inland spot methanol prices fell this week as demand has slowed due to the slowdown in many tradi-
tional downstream sectors since late December. Severe air quality issues (smog/haze) have recently impacted most

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Argus Methanol Issue 17-1 Friday 6 January 2017

Asia-Pacific
regions of northern China. These conditions are not only hampering road transportation, causing difficulties shipping
methanol from inland regions, but has also forced production cutbacks (or shutdowns) of high-polluting downstream
manufacturing facilities—including solvents, adhesives and additives production.
Inland methanol producers have been forced to reduce offer prices to trigger more sales. Towards the end of the
week, trading prices dropped to Yn2,350-2,480/t (ex-tank Inner Mongolia and Shaanxi province), a fall of Yn120-150/t
from the previous week.
For this week, average MTO operating rates are estimated at just 63pc, compared with last week’s 67pc and 79pc
two weeks earlier, before the start-up of the two new MTO units. Jiangsu Sailboat, one of the new MTO producers,
is understood to have shut its 800,000 t/yr unit down on 6 January, as its ethylene output was too high for consump-
tion. The plant was operating near 70pc rates prior to the shutdown. Jiangsu Sailboat has not yet completed facili-
ties to ship-out ethylene and its ethylene storage capacity is limited. The shutdown is expected to last a few weeks,
as its downstream 300,000 t/yr ethylene vinyl acetate (EVA) capacity (two trains) is expected to be brought on-line
in February and March, respectively.
The other newest MTO producer, Changzhou Fund, has ramped up rates in its 330,000 t/yr MTO unit to 90pc on
6 January and has started selling both ethylene and propylene this week. Its downstream PP unit may start-up in
about a week as technical issues have impeded its operations.
Elsewhere, Shandong Yangmei Hengtong is in the process of restarting its 300,000 t/yr MTO unit. The plant was
shut on 2 January to replace equipment parts. Zhejiang Xingxing has reduced MTO rates to 80pc since 5 January, in
light of poor economic conditions. Conversely, Shandong Shenda returned to full operations (from previous 80pc) as
MTO cash margins have improved this week in tandem with firmer ethylene oxide (EO) and EVA prices.
The week’s CTO operating rates dropped to 78pc, from previous 88pc. Market talk surfaced (on 6 January) that
inland CTO producer Pucheng Clean Energy shut its olefins and polymer plants in the middle of the week due to
mechanical issues. The producer was forced to sell crude methanol in the local market at Yn2,300/t levels (ex-tank)
against market prices for spec methanol in the Yn2,430-2,480/t range. The duration of the shutdown is expected to
be 7-10 days.
MTO margins directionally improved this week with falling methanol prices and olefin pricing remaining mostly
steady. Major derivative products MEG and polyethylene (PE) are steady to soft, but EO prices have risen for the
third week in a row by as much as 9pc. Propylene derivatives, particularly polypropylene (PP), have fallen in the
past two weeks. MTO margins, if based on olefins prices alone, see estimated cash margins of -$180/t this week,
compared with last week’s $200/t. Ningbo Fund still maintains thin margins this week, at $20/t. Inland MTO margins
recovered to $70/t levels this week, from a bottom at $25/t seen two weeks ago. CTO margins “narrowed” to $455/t
this week, from a six-month high of $515/t in mid-December.

South Korea and Taiwan


South Korea’s methanol market was mostly unchanged this week, not yet responding to the downward price direc-
tion seen in the China market. Ongoing “short” supplies may keep spot pricing at higher levels for a period of time.
Some consumers have noted their term volumes were cut following OMC’s unplanned shutdown in late December.
No offers were seen available this week as most spot supplies in the region still target China’s higher premiums.
Buy-sell indications hovered in the $355-365/t range (cfr South Korea basis), unchanged from the previous week. In
domestic market, trades were done at levels as high as $370-380/t, ex-tank basis.

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Argus Methanol Issue 17-1 Friday 6 January 2017

Asia-Pacific
The Taiwan spot methanol market continues to lack trading liquidity as spot avails remain limited. Consumers
have been forced to adjust their operations based on term supply volume agreements.
Notional buying ideas were slightly softer for the first full week of the year, hovering in the $345-350/t range
(cfr Taiwan basis), seemingly tracking “softer” China market prices. However, sellers maintained target prices levels
closer to $360/t.
Taiwan’s 2017 term contracts are said to be mostly fixed. Market talk suggests pricing has been settled at a small
premium (0.5-1pc) against cfr Taiwan spot average posted prices.

Southeast Asia
Spot methanol prices in southeast Asia continue to rise as the new year begins on the back of “balanced-to-tight”
supply conditions. Regional sellers still look to divert large volumes to China due to better netback, resulting in a
reduction in allocations to buyers in this region.
Hence, buying ideas firmed (for 2,000t lots to $355-360/t levels (cfr southeast Asia), while larger 3,000-5,000t
parcels were bid slightly lower. Sellers mostly targeting offer prices nearer $365/t and higher, supported by the re-
cent strength in the China market—although this week slipping. Ex-tank prices in Vietnam and Indonesia are seen at
$400/t and higher, while Thailand was weaker, nearer $380/t.
Production/supply issues remain a highlight, with the December/early January issues with Oman Methanol reduc-
ing typical deliveries into the region. All southeast Asia producers are reported running well, although there are
rumors the smaller Petronas unit may soon need to take an unscheduled outage.
On the term contract front, settlements are being concluded with discounts/premiums flat to +1pc for major and
minor port deliveries in 2017. Some contracts settled earlier in November 2016 were done with a 0.5-1pc discount
range. Shortly thereafter, discussions firmed considerably, following the surge in China and regional prices, switching
discounts to premiums.

India
India’s spot methanol market prices jump as 2017 begins, still playing catch-up to the rest of the Asia-Pacific region.
Market fundamentals are a bit mixed as inventory levels are said to be low—on sluggish arrivals from Iran and Saudi
Arabia—against a slump in demand across November and December due to the demonetization policy. Local im-
porters were forced to reduce purchases at that time on poor demand and cash flow issues. Through this period, a
majority of these sellers also opted to divert sales to China to capture higher netbacks.
But as the year begins, methanol demand is seen much improved in the domestic market. Hence, ex-tank prices
firmed to Rs25.5-26/kg this week. On a cfr India basis, buying ideas were boosted to $315/t levels, excluding pre-
miums. A sell tender, for 20,000-30,000t of methanol, was opened this week by an Iran seller and is due to close 9
January.
2017 term contract settlement discussions are ongoing at present. Buy-sell indications for cargoes from other
countries (except Iran) look to be in the 0-2pc premium range against posted pricing. A key Iran producer has like-
wise opened talks for settling term contracts into China and India.

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Argus Methanol Issue 17-1 Friday 6 January 2017

Industry equivalent
Regional arbitrage $/t Producer and marketer posted prices $/t
100 450

50 400

350
0

300
-50
250
-100
Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 200
Jan 16 Apr 16 Jul 16 Oct 16 Jan 17
US minus Europe US minus China
Europe minus China India minus China MNDRP MEPCP APCP MPP

Energy summary
Natural gas prices $/mmBtu Natural gas index month averages
29 Dec 30 Dec 3 Jan 4 Jan 5 Jan Jan
Henry Hub spot 3.668 3.645 3.373 3.373 3.300 Houston Ship Channel HPL $/mmBtu 3.475
Nymex 3.802 3.724 3.327 3.267 3.273 Henry Hub $/mmBtu 3.565
Nymex 3.754 3.684 3.317 3.249 3.268 Alberta NIT/AECO C$/GJ 3.275

US natural gas in underground storage Bcf Nymex WTI, Ice Brent and Argus Dubai $/bl
60
4,200

3,500 55

2,800
50

2,100
45
1,400

40
700
Jan Apr Jul Sep Dec 07 Sep 16 18 Oct 16 25 Nov 16 06 Jan 17

5-year range Lower 48 5-year average CME WTI Ice Brent Argus Dubai

Week ended 30 Dec — EIA

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Argus Methanol Issue 17-1 Friday 6 January 2017

Announcement
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nol Report will change to Argus Methanol. Please contact info@argusmedia.com if you have any questions.

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