US July methanol heads for rollover as spot finds floor

25 June 2010 22:10  [Source: ICIS news]

HOUSTON (ICIS news)--The US methanol contract for July is heading for a rollover from June's $1.05-1.07/gal as supply concerns ease and the backwardation in forward months has faded away, market sources said on Friday.

Spot prices had fallen since a spectacular surge in May due to an extended outage at the 1.7m tonne/year Atlas plant in Trinidad, but stabilised in the 90s cents/gal range - around 20 cents/gal above the level seen before the plant went down.

The spot market "has definitely found a floor," one market source said.

Major producer Methanex nominated $1.05/gal for its July contracts, steady with June.

The other major methanol supplier, Southern Chemical, had not yet issued its July nomination after nominating $1.07 for June.

Methanex confirmed the restart of the Atlas plant took place around 15 June, ending a six-week outage.

But there was no word on the progress of the restart, a procedure that is often a bumpy ride at methanol facilities around the world.

"It's always dicey," another source said. "It takes time to get them going."

One rumour suggested that the restart process had been set back a week already, but the stability in the spot market this week suggested that market participants had confidence that Atlas supply would be flowing again in due course.

Methanex did not respond to repeated telephone calls seeking comment. The Canadian producer owns 63.1% of the Atlas plant, and BP owns the other 36.9%.

The increase in the June contract price had been the first since December, when major sellers pitched their nominations just a few cents above the prevailing spot market values.

The contract range then held steady through April despite a steady slide in the spot market that widened the gap between contract and spot to around 35 cents/gal, forcing major suppliers to bring their nominations down.

If the June contract range rolls over into July, it would only be around 10-15 cents gal above current spot levels - consistent with the gap seen from October through March.

For more on the Methanex Atlas plant, visit ICIS plants and projects 
For more on methanol visit ICIS chemical intelligence
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By: Stephen Burns
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