Q2 methanol reduction will not stimulate demand - sources

13 March 2009 16:43  [Source: ICIS news]

LONDON (ICIS news)--Sellers of methanol in Europe will resist any downward pressure on pricing for the second quarter owing to a belief that a reduction will not stimulate demand, producers said on Friday.

Meanwhile, there were fears that a price decrease could detract more suppliers from re-entering the market following several shutdowns and go-slows in Russia and central Europe.

“As far as we can see the contract price could be set too low, where cash flow goes negative,” said a source at a major European producer.

Responding to news that buyers were seeking a second quarter contract price in the range of €130-140/tonne ($167-180/tonne), the source continued: “Demand is not dependent on price. Demand is what it is, and no one thinks it will pick up with a lower price. Even if it settled at €100/tonne I don’t think it would make a difference.”

Such comments were echoed throughout the producer camp, and by some consumers.

“I don’t think even €130/tonne would stimulate demand. Most people are struggling with contract volumes. Lower cost producers will need to tighten the wick, as the [volume] reductions from higher cost producers were not enough,” said a buyer in the formaldehyde sector.

However, some producers accepted that a reduction may be unavoidable.

“I think and hope we will see a rollover, but it will be hard to defend, especially with spot numbers where they are,” conceded a producer.

Spot values traded through the week at €116-120/tonne FOB (free on board) Rotterdam.

($1 = €0.78)

For more on methanol visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Shelley Kerr
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly