Full Chinese tanks pressure methanol sellers

Methanol sellers in Asia and the Middle East are under pressure to cut production rates or face demurrage costs as Chinese storage tanks have no space left.

There are vessels waiting to discharge methanol at major ports, and a number of sellers are incurring demurrage costs. Tanks are known to be fully stocked with chemicals like methanol, styrene monomer and MEG, while there is demand for tanks to store petroleum products as well.

Methanol port inventories rose for the fourth consecutive week in China and reached 1.19mn t after a build of 39,000t. Stocks with importers as well as consumers at all major ports in east and south China have reached tank-top levels, with terminal authorities declining further discharge of spot cargoes.

Some terminals have also informed that term users have to empty tanks before storing regular shipments. There are simply no more tanks available.

Producers and traders selling to China are thus forced to bear demurrage charges as the waiting time for discharging molecules could be 10 days or longer. This situation is expected to last until early June, which may force some producers to consider cutting rates or find other outlets in the region.

"We have not cut production yet, but may consider in June," said a key Middle East-based producer, echoing statements from an Iranian producer.

"This is not driven by price, but by the lack of vessels and the inability to place volumes," the same producer said.

Iranian producers are also facing limited vessel availability, as a number of vessels are stuck in China. These producers are selling to China and India amid the US-led sanctions, and are facing further pressure as India remains under lockdown to contain Covid-19. There have been limited shipments to India from Iran, prior to the lockdown, amid some vessel-related issues.

By Mahua Chakravarty

source: Argus Media