Spot methanol demand in Southeast Asia is expected to firm in January and February, with 2012 term contracts with Petronas yet to be concluded, said market sources Monday.
Lack of term cargoes, which are typically delivered from January, will force buyers to look to the spot market to meet their requirements, they added.
"Petronas is asking [some end users] to bid, instead of offering [for their term contract] ... They're looking around to see who can give better [contract terms]," said a source based in Malaysia.
"[There's] nothing. I've already checked with other buyers and term contract customers [of Petronas]. There's no discussion until now," said a source based in Indonesia.
Petronas had to shut its 660,000 mt/year No. 1 methanol plant in Labuan last Thursday, after restarting it Monday, as operations had become unstable on Wednesday, said sources.
Meanwhile, the company's No. 2 plant with a 1.7 million mt/year capacity has been shut since November 18 due to contamination in its natural gas feedstock supply.
Though Petronas has not officially stated when it expected to restart its No. 1 plant, a source close to the matter said the plant could be fully operational in January, while the No. 2 plant was expected to run at only 40-50% of its production capacity in the same month.
If both plants operate at their best possible rates during January, Petronas was expected to supply around 125,833 mt of methanol in January and the same volume February. With no term contracts concluded yet, it is possible this quantity could be offered in the spot market, or used to cover earlier commitments, if any.
LIMITED ALTERNATIVE SOURCES FOR METHANOL BUYERS
Indonesia's Kaltim Methanol Industri, meanwhile, will allocate 40% of methanol output from its 660,000 mt/year Bontang plant to domestic buyers in 2012, an increase of 10 percentage points from the year before, a company source said.
As a result, there will be less Indonesian methanol for regional term buyers. Middle East suppliers were also unable to fulfill term demand.
"I have been talking to Middle East suppliers for term contracts, but they say there's no chance," said a buyer in Southeast Asia. "Now, all are screaming for cargoes, so [producers] are not worried," said the source. A source from a methanol producer in the Middle East said he was seeing more spot enquiries for January and February cargoes.
"If you make an educated guess, it's because they have not landed any contracts with Petronas next year," he said, adding that "it's either you pay up, or you don't get volumes".
A source at a regional producer added that the Middle East methanol producers may allocate a larger portion of production in the spot market. "They know prices in Europe are not good now, so they are bringing product to Asia. But they can swing their product to Europe if the situation improves," said the source.
There are three main methanol producers in Southeast Asia. Malaysia's Petronas is the largest, with a 660,000 mt/year No. 1 plant and a 1.7 million mt/year No. 2 plant -- both at Labuan. Brunei Methanol Company has an 850,000 mt/year plant in the Sungai Liang Industrial Park, Brunei, and Kaltim Methanol Industry has a 660,000 mt/year unit in Bontang, Indonesia.
