China methanol prices have increased despite healthy inventory, partly due to positive sentiment ahead of the launch of methanol futures on Zhengzhou Commodity Exchange, traders said Tuesday.
"From previous experience, when new commodities are listed in the futures market, the market will see a boost in the beginning," said a China-based trader.
ZCE, plans to launch China's first official methanol futures contract in May or June, Platts reported earlier.
The CFR China methanol price rose $13/mt week on week last Friday to be assessed at $353/mt. On Tuesday, CFR China offers were heard at $365/mt, against buying indications of $355/mt and above. A firm bid for a more prompt cargo, for delivery at the end of May, was heard at $360/mt.
Methanol inventories in East China for weeks have held at 400,000-450,000 mt, considered high by market participants. The stock level has remained constant despite firmer downstream dimethyl ether and acetic acid markets, indicating that methanol purchases has kept pace with the inventory drawdown. More shipments are expected in the weeks ahead, market sources added.
Traders also pointed to the bullish yuan-US dollar exchange rate as a reason behind the strength in methanol prices. A Singapore trader explained that some traders who buy on a CFR China basis are betting on making a profit on the exchange rate, and could do so even if the CFR price edged down.
"Methanol is safe for [yuan] gambling," said another China trader, who noted that methanol prices are less volatile than that of other petrochemical products. The trader was offering a June cargo at $370/mt CFR China last Friday.
A Dubai trader said that higher crude prices have also supported the bullish environment.
China is leading Asia in the methanol price rise, pulling the rest of the region up along with it. Last Friday, CFR South Korea and Japan prices also rose $13/mt to be assessed at $350/mt.
