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 ?xml:namespace>
“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)
($1 = €0.78)
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