Europe methanol buyer threatens Q1 rollover

20 December 2007 15:18  [Source: ICIS news]

LONDON (ICIS news)--A major methanol consumer will drop its proposal for the first-quarter European contract from €460/tonne ($660/tonne) to the rollover level of €380/tonne in the new year, on more balanced market conditions, a company source said on Thursday.

“We will keep the €460/tonne offer open this week and change it to a rollover [from the fourth quarter] at the beginning of January... No big customer will close over €500/tonne” he said.

This was in reaction to StatoilHydro’s proposal of €530/tonne and Helm’s position at €595/tonne, he added.

The price discrepancy between European and Asian values and a sense that the market in Europe was now more in balance than before were cited as justifications for the customer’s move.

“In China, there are no homes for the imports. Tanks are full. The formaldehyde industry in China is very, very weak,” the source said.

A total of 5,000 tonnes for January and February were sold on the European spot market at €480/tonne this week, down from the previous €510-530/tonne spread.

These transactions and talk of a further 10,000 tonnes on its way to Europe from Asia and the Middle East pointed to a healthier supply situation, he said.

“Methanol plants are all running, the supply chain is filling up and the market is more balanced than before,” he added.

“Q1 supply is coming into balance... it is now more stable, no forces majeures, no major hiccups. The market will not be long, just more in balance,” another source agreed.

“I expect a downward price shock in January spot numbers, a sharp fall in ths second quarter,” he added.

The formaldehyde sector in particular was experiencing reduced rates due to high inventories and not being able to pass on the high price of methanol, the source said.

The fourth-quarter contract price was settled at €380/tonne FOB Rotterdam.

($1 = €0.70)

By: Caroline Howard
+44 20 8652 3214

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