Slumping Methanol prices soften Formaldehyde prices in India – 7 Apr 2014

Since last month, the bulk prices of Methanol in the country have dropped by double digits, when compared against current prices. In this review, Indianpetrochem studies the implication on the price of its chemical intermediate, i.e, Formaldehyde, for which India has good manufacturing capacity.

 

Since the second week of March, the bulk price of Methanol has moved from of Rs. 34.5 per kg (exclusive of all taxes) during mid March to present level of Rs. 24 per kg (exclusive of all taxes), backed on oversupply of imports at Indian ports amidst moderate to strong demand conditions.

 

The booking price of Methanol has been declining rapidly since last month, where the price hovered around $480 per metric tonne CFR India on 8th March 2014, thereafter the prices slid to levels of  $355-360 per metric tonne on 29th March , 2014, according to data gathered by Indianpetrochem. As recent as 4th April, 2014, the booking price of Methanol to India declined to range of $315-320 per metric tonne.

 

The price of Methanol has been bearish internationally; this can be gathered from prominent industry benchmarks asICIS Petrochemical Index (IPEX), an index which assess 12 petrochemicals in Asia, which hit a fourth mouth low in April. According to IPEX, Methanol prices hit 7 month low in this month within Asia.

 

At this point, its interesting to observe that Methanex, the largest manufacturer of Methanol in the world, did a downward price revision for Methanol under all regions in the month of April. The Asia Pacific contract price for Methanol in April declined by $110 per metric tonne and settled at $480 per metric tonne, the first downward price revision in current year.

 

To this effect, a trader added that as a consequence of negative market sentiments internationally, Indian import bulk prices are expected to fall to Rs. 22.75 per kg (exclusive of all taxes) in the immediate future.

 

"Falling booking prices for Methanol has built huge stock inventories at the Indian ports while the demand has remained uniform and unaltered by the surge in supply. Consequently, the bulk, and domestic ex-factory price have been very volatile since last month in India", another trader compiled the Methanol scenario in India.

 

According to data gathered by FICCI, 45% of the Methanol consumed within India is used in manufacturing Formaldehyde, which is the largest sectoral usage for the chemical in the country.

 

The Ministry of Chemical and Petrochemical complied that the current installed capacity of Formaldehyde was 448,790 per metric tonne while the consumption was at  270,000 per metric tonne in  FY 2012-13.

 

Also, its interesting to note that the world trade for Formaldehyde is minimal as there is stability related problems during its transportation, hence,  the chemical is usually produced at the point of consumption.

 

Indianpetrochem gathers from its database, that the bulk price of Formaldehyde (37%) hasen't moved as significantly as its feedstock, Methanol. The bulk prices mostly remained stable at Rs. 22 per kg (exclusive of all taxes) in Mumbai market until the last week of March, thereon the prices dwindled to Rs. 19 per kg tand eventually settled at current levels of Rs. 14.5 per kg, all prices are exclusive of all taxes.

 

The demand for the chemical is strong in Indian markets given its widespread application in manufacture of thermosetting plastics, Phenolic formaldehyde resins and Methyl di-p-phenylene isocyanate (MDI).

 

A prominent trader added that Formaldehyde is predominantly used for manufacturing of Phenolic resins which has wide scale applications in the automotive and construction industries including brake linings, foundry binders, insulation foams and composites. As such, the trader added that the demand for the chemical remains consistently strong throughout the year in India.

 

"The main reason for the decline in the price for Formaldehyde is due to the fall in feedstock prices , not weak demand conditions", a trader informed the website.

 

In conclusion, its interesting to note that the fall in price for Formaldehyde isn't as significant or even as volatile as it has been for Methanol in India. In all eventuality, due to ongoing slump in prices, its reasonable to say that there would mostly probably be a price decline for Formaldehyde in the county as cheaper Methanol hits the Indian shores in the coming weeks. Ultimately, it will be interesting to see if the price decline will be as steep  for Formaldehyde as noted for its feedstock.