Europe Methanol spot prices to resist seasonal drop-off

24 November 2009 16:29  [Source: ICIS news]

LONDON (ICIS news)--Methanol spot prices in Europe are likely to break from tradition and stay steady in December, market sources said on Tuesday.

Global production problems and a tight market led to prices reaching 10-month highs in September, which resulted in low inventories throughout Europe, sources said.

The situation meant many sources were predicting that the period of destocking usually seen in December would not be undertaken by the majority of market participants, and would be muted by those that do.

Sources explained that most companies usually try to run down their stocks ahead of January in order to enter the new financial year without high levels of working capital. This destocking significantly diminishes demand, and so prices fall.

However, with stocks so low, most companies would need to stay active in the spot market in order to maintain operations, sources said.

“No customers have high inventories, so I do not see any turndown in demand [in December],” a producer said.

Others were more cautious, and thought a price drop was still probable, albeit a mild one.

“Prices will get a little softer perhaps, but stocks are low so demand should be maintained,” said another producer.

Sources also noted that strong US prices were pushing up European prices.

Reports were heard of global shipments being diverted from Europe to the US in order to take advantage of the more attractive marketplace there.

While no reports of tightness were yet heard, several sources said price ideas were being pushed up by the news.

Offers in Europe hit a six-week high of €210/tonne ($313/tonne) FOB (free on board) Rotterdam in the week ending 20 November, although no trades were heard above €200/tonne.

The bid/offer range was €197-203/tonne for both November and December loading on Tuesday.

($1 = €0.67)

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By: Ross Yeo
+44 208 652 3214

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