Dull demand may drive methanol manufacturers to further price cuts

Vijay Trivedi

Mumbai, Nov 4: Sluggish demand has forced methanol manufacturers to cut down their prices in the domestic market by around 30 per cent in September. The domestic situation is a bit better when compared with the international market where the prices have slumped by around 57 per cent. Traders say, if the current situation continues -- which is most likely -- the manufacturers will have to cut down their prices further by 10-15 per cent during the coming months.

This has resulted in a massive stockpile of methanol, which industry sources put at over 60 per cent of the domestic installed capacity of over 3.10 lakh tpa.

Add to this, the recent 20 per cent hike of insurance premiums by the insurance companies for import cargo, which is likely to stall the otherwise steady imports, and thus imports of methanol would almost come to a standstill.

Despite lower imports following hike in the insurance premiums, traders don’t see local producers daring to raise their prices, thanks to poor demand and cutting down of order bookings by buyers of end-user of methanol. Methanol is an important ingredient for DMT, paints, pharmaceutical, varnishes, and perfumary among others.

Last Thursday, methanol was quoted in Mumbai at Rs 10,000 per tonne, down from Rs 15,000 per tonne in March this year, while the international prices were in the region of $103 per tonne, down from $240 per tonne in March.

Both the leading methanol manufacturers, Deepak Fertiliser and Rashtriya Chemicals and Fertilizers were selling methanol at Rs 9,000 per tonne and at Rs 10,000 per tonne respectively, down by Rs 1,000 per per tonne from the prices in September.

Deepak Fertiliser and Petrochemcials Corp has an annual capacity of 60,000 tpa while Rashtriya Chemicals and Fertilizers (RCF) 100,000 tpa, and Gujarat Narmada Fertilizer Corp (1,50,000 tpa) are the major producer of Methanol.

Said owner of Jay Ambe Enterprises and a leading trader Jayesh Ruparel: "Due to the ongoing sluggishness, there is extremely poor demand from downstream product manufacturers forcing the methanol producers to cut their prices." Said a paints manufacturer: "Given the current trend there are high chances of methanol prices to slide further by 10-15 per cent by next week".

While the demand has been sluggish since early 2001, traders said the demand seems to have seems tapered off. Further, after the US-Afganistan war the demand from international markets too have been too low.