Imports during the first six months of the current year have already touched 55,000 tonnes as against the same figure for the whole of 1997-98. Bulk consumers of the chemical have completely shifted to imported material thus leaving the domestic manufacturers to cater to smaller consumers.

Price decline in south east Asian market like Indonesia have been even steeper at around $70 per tonne. Industry sources say that the situation is extremely grim considering the fact that crude oil prices have started to rise.

Demand for methanol has been virtually stagnant and the demand from fertiliser units has started declining. More importantly prices and demand of MTBE (methyl tertiary butyly ether) have been depressed for a long time. Unless the scenario for this product improves, market sources saythere is little scope for improvement in methanol prices. MTBE is used as an anti-knocking agent in fuels.

Indian manufacturers are pricing methanol between Rs 7,000 per tonne and Rs 8,500 per tonne as against Rs 13,000 to Rs 15,000 per tonne a year back. At the current price levels many manufacturers are able to recover only their variable costs. Rupee depreciation and higher import duty rates have done little to prevent the local manufacturers.

The recession in the south east Asian market has resulted in the chemical being literally dumped in the Indian market. As prices in the entire south east Asian market is low, a case of anti-dumping can not be made. The problem is of excess supply and low consumption and which has led to the fall in prices and there is nothing one can do about it, industry sources say.

Landed price of methanol (including 30 per cent import duty, 18 per cent countervailing duty and 4 per cent special duty) works out to be Rs 6,000 per tonne. Higher price differential betweendomestic and imported prices which were as high as Rs 5,000 per tonne has resulted in increasing imports.

This led to domestic manufacturers drastically cutting down their prices.As if this was not enough, methanol manufacturers using natural gas as the raw material are facing supply problems. This has led to increase in use of naphtha, which increasing the manufacturing cost thus squeezing the margins. Any future improvement in prices of methanol looks bleak, say industry sources. As much as six million tonnes of capacity is likely to be added in middle-east in the next two-three years. The problem of additional capacity in middle-east is even more serious considering the fact that the area hardly consumes any methanol and the whole supply will be made available in the south east asian market. A recent study has pointed out methanol manufacturers, will be running their plant at 72 per cent capacity utilisation by the turn of the century.

Industry observers say that the reason domestic companies areable to survive is because smaller consumers are unable to import methanol as per their requirement. Importing the product in bulk would increase their holding cost, considering the fact that most of the companies, both large as well as small are undergoing a cash crunch, very few would be willing to hold high inventories.