Rise in spot US methanol prompts talk of higher November contract

20 October 2010 20:47  [Source: ICIS news]

HOUSTON (ICIS)--Rising spot US Gulf methanol prices have prompted talk of a 5 cents/gal jump or more in the November contract, market sources said on Wednesday.

But why spot methanol had climbed 10% in the past two weeks stumped most sources, with one saying fundamentals did not support such prices.

"Something else is going on," the source said. "Nothing is making sense right now."

One obvious explanation is tighter supply from October turnarounds at two methanol plants with North American customers - the 1.15m tonne/year Atlantic Methanol Production Co (AMPCO) facility on Bioko Island, Equatorial Guinea, and the 1.9m tonne/year M5000 plant at Point Lisas, Trinidad.

A source also noted that Asian supplies had been short recently, with inventories down in China from turnarounds at plants in the northwest region and operating rates low in the northeastern provinces as well.

Another market source said the push up might be nothing more than a producer buying because of logistical issues.

Whatever the case, a large buyer said a contract price of 115 cents/gal was "not out of the question", based on the spot range of 106-107.5 cents/gal ($354-359/tonne, €258-262/tonne) set on Tuesday. Spot prices peaked at 115 cents/gal in mid-May.

A market source on Wednesday mentioned rumours of a deal at 108 cents/gal, but it could not be confirmed.

Spot values of 106-107.5 cents/gal have almost caught up with the October contract range of 108-109 cents/gal.

The yearly high for the contract, 110 cents/gal, prevailed from January through April. Then prices dipped unexplainedly for a month before taking off in May on an extended plant outage in Trinidad.

Methanol contract prices tend to track spot levels closely. North American suppliers include Methanex and Southern Chemical (SCC).

($1 = €0.73)

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By: Lane Kelley
+1 713 525 2653

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