Methanol stopped getting cheaper – Newspaper Kommersant No. 66 (7511) dated 04/17/2023

Methanol prices in the Russian market, after almost a year of decline, went up, for the first time since last year exceeding 20 thousand rubles. per ton. The key factor was a gradual increase in domestic demand against the backdrop of a sharp decline in production and exports. As a result, experts expect methanol prices to continue to increase in April.

The situation in the domestic methanol market, which at the end of 2022 fell into the eighth package of European sanctions, stabilized in March, according to a survey by the Center for Price Indices (CPI) of Gazprombank.

The cost of methanol supply in the Central and Volga districts was 18.6–19.1 thousand rubles. per ton including delivery costs and VAT (CPT Moscow, CPT Volga). In April, according to experts, the situation will continue to improve as supply and demand gradually balances, as well as due to the weakening of the ruble. According to preliminary estimates by the CIC, the price on these bases will be 20.5–21.5 thousand rubles. per ton. Export prices for methanol at FOB Rotterdam in March approached the level of €350 per ton (28.7 thousand per ton at the average rate for March).

Last year, in March, the price was about 35 thousand rubles. and since then has gradually and almost continuously decreased. Since the beginning of 2023, the cost of methanol has been above the level of 20 thousand rubles. did not rise. The main reason for the rise in prices was the reduction in supply by Russian producers. According to Rosstat, in February they reduced methanol output by 28% compared to the same period last year and by 9% compared to January.

The volume of domestic traffic is also decreasing (by 14% in March). At the same time, CCI experts note, manufacturers are gradually adapting to the new conditions of the external market. So, in March 2023, more than a quarter of export shipments went to China, although traditionally almost all methanol exports from Russia transshipped through the infrastructure of European countries.

At the end of 2022, the main shipment destinations were Finland (about 860 thousand tons) and Belarus (over 835 thousand tons), while exports through the Far East amounted to only about 165 thousand tons of methanol. This year, according to market participants, transshipment through Far Eastern ports may reach 700,000 tons. In general, export shipments in March fell by 11% compared to the same month last year, however, the dynamics of individual manufacturers was more serious: for example, Samara’s Tomet (controlled by Uralchem) almost stopped exporting.

As noted in the review, the situation on the gas market is also stabilizing, the price of which is the main factor affecting the cost of methanol. According to experts, the cost of gas in the world will remain stable in the first half of 2023 against the backdrop of an abnormally warm winter in Europe and maximum gas reserves in underground storage facilities by the end of the heating season (55.7% as of April 11). In March, the CCI reminds, prices in Europe dropped to $400 per thousand cubic meters. Vyacheslav Mishchenko from the Center for Analysis of Strategy and Development Technologies of the Fuel and Energy Complex of Gubkin University agrees with this forecast.

Independent expert Leonid Khazanov believes that the recovery of domestic methanol prices is due to the desire of its producers to win back the decline in exports and ensure the necessary profitability of production. At the same time, he notes a noticeable recovery in demand from domestic consumers. According to Dmitry Akishin, Managing Director of Implement, methanol is not a key factor in pricing in most industries of the Russian Federation that consume this product as a raw material, so its cost has little effect on demand. The dynamics of demand depends on other factors: for example, a decrease in gas production may cause some drop in demand for methanol, which is used to prepare it for pipeline transportation.

Olga Mordyushenko