Europe Q3 methanol may roll over either in euro or dollar terms

11 June 2010 16:25  [Source: ICIS news]

By Ross Yeo

HAMBURG (ICIS news)--The European third quarter methanol contract is likely to settle at a rollover; either in euro terms at €250/tonne ($303/tonne) or on dollar terms at around €270/tonne, sources said on Friday.

With the vast majority of methanol players attending the 22nd IMPCA mini-conference in Hamburg just two and half weeks before the end of the second quarter, talk of the impending negotiations was inevitable, albeit largely behind the scenes.

Many sources agreed that while consumers were likely to target a rollover in euro terms, suppliers would instead prefer the price to stay level in relation to the US dollar.

Europe is a deficit market, in that it relies on imports to meet its demands, and as such domestic prices are heavily influenced by changes to the euro-dollar exchange rate.

With the euro steadily weakening versus the dollar, the contract would need to increase by around €20/tonne simply to stay steady in dollar terms.

Changes to the exchange rate were largely accountable for the previous quarterly rise of €15/tonne, sources observed, lending weight to the argument for a similar increase.

Furthermore, with US prices strong and Asian prices improving slightly, the chance of an increase in Europe was more likely, sources said.

Additionally, sources said the current spot level of €230/tonne was, in all likelihood, being protected by large suppliers and producers as a floor price in the run-up to the settlement, which indicated their intentions to push for an increase.

Yet others pointed out that there were risks of oversupply in the coming months, with commercial volumes expected from new plants in Oman, Venezuela and Egypt either late in the second quarter or in quarter three.

On the whole, however, sources said there was much uncertainty regarding the contract price and many variable factors, and all were loth to offer solid predictions.

The new capacities mentioned above had all suffered delays and, with the exception of the Omani plant, which was producing off-spec material, it was impossible to say when they would actually commence production.

The currently shut down Atlas plant in Trindad would have a significant effect on Atlantic supplies, although whether or not that would successfully restart on time remained questionable, sources said. The activity of China, both in terms of prices and levels of imports, and also the conclusion of its anti-dumping investigation, would also influence Europe heavily.  

The European quarterly contract price is settled on a free on board (FOB) Rotterdam basis.

($1 = 0.83)

To discuss issues facing the chemical industry go to ICIS connect

For more on methanol visit ICIS chemical intelligence

By: Ross Yeo
+44 208 652 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