South Korean methanol trades below SE Asian prices

Methanol prices in South Korea have slipped below southeast Asian values since the start of this year, undermined by ample supplies from the US and Trinidad and Tobago while derivative consumption suffers.

Spot prices in South Korea historically trade at premiums to southeast Asia, as occurred throughout most of 2022 where spreads between the two markets averaged at $6-7/t. But 2023 has seen a reversal of this trend, with cfr South Korea prices trading at discounts of around $15-20/t to that of southeast Asia so far this year.

Differing supply fundamentals have been a major driver behind the relative price strength in southeast Asia and the slowdown in South Korea.

Supplies to other markets in Asia-Pacific, including southeast Asia, were previously curbed because of regional maintenance turnarounds and plant disruptions in the Middle East. But South Korea sources the majority of its methanol requirements from west of the Suez and has seen no shortage of export availability since the start of the year. The US shipped around 44,700t of methanol to South Korea in February, while exports from Trinidad and Tobago totalled 81,480t, GTT data show. Shipments from both countries accounted for more than 70pc of the methanol imports to South Korea. Deliveries from the Middle East accounted for 28pc.

Derivative consumption remains weak with several major MTBE units shut for maintenance turnarounds in March and April. Downstream operations are expected to recover only late in this year's second quarter.

The current trends are likely to continue in the short term given that production in southeast Asia will likely dip in April. Brunei Methanol is expected to start a maintenance turnaround at its plant in Sungai Liang from mid-April until the end of May.

By Leanne Tan