Europe Q3 methanol to rise in line with firmer spot

12 June 2009 20:28  [Source: ICIS news]

PRAGUE (ICIS news)--Third-quarter methanol prices in Europe were expected to rise by up to around €20/tonne ($28/tonne) on a sustained upward trend in the spot market, buyers and sellers said on Friday.

Spot values rose to a six-month high this week as importers were forced to enter the market to cover their obligations following a reduction of supply from the Middle East. This increase would drive prices higher, market players said.

"For me the logic is clear. The same arguments that were applied to push the market lower when spot prices were falling have to be applied again now. Spot prices are higher and the contract price needs to rise," said the general manager of a European producer.

The majority of buyers agreed that the sustained upward trend seen in the spot market in recent weeks would result in a moderate increase for the Q3 contract. Many consumers said that they thought the price would return to the first quarter level of €159/tonne, while other numbers put forward were in the low to mid €160s/tonne.

"One of my suppliers said it would be targeting €175-180/tonne, but when I argued that demand was still weak and that fundamentals did not justify such an increase, they said of course we understand and started talking about a more realistic €160-165-tonne.

Negotiations were ongoing and it was unclear when an initial settlement would be reached.

Methanol is used in the production of formaldehyde, acetic acid and methyl tertiary butyl ether (mtbe) among others.

($1 = €0.71)

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By: Shelley Kerr
+44 20 8652 3214

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