Mideast, N Africa uprisings shake up Europe methanol Q2 price ideas

04 March 2011 17:51  [Source: ICIS news]

LONDON (ICIS)--Ideas for the Europe methanol second-quarter contract price (CP) have been shaken up by the turmoil in North Africa and the Middle East, and how the situation develops over the next two to three weeks will be the deciding factor between a decrease and an increase, sources said on Friday.

Prior to the political upheaval in Egypt and Libya, most market players were in agreement that a slight decrease in the contract price was likely, with a rollover mooted as the best outcome suppliers could hope for.

This sentiment was the result of a well-supplied market and relatively weak spot pricing, both locally and globally.

Despite unplanned outages earlier in the quarter at Salalah Methanol Company’s 1.3m tonne/year plant in Oman and Methanex’s 850,000 tonne/year Titan plant in Trinidad, European spot prices remained in the €260s/tonne FOB (free on board) Rotterdam, leading many buyers to suggest the first-quarter contract price of €315/tonne ($438/tonne) was too high.

However since the uprisings, prices have increased steadily and were trading in the range €274-281/tonne in the week ending 4 March.

This was despite the fact that the only actual supply interruption was to the Libyan National Oil Corporation’s (NOC) 660,000 tonne/year capacity in Marsa El Brega, along with further setbacks to Methanex’s long overdue 1.3m tonne/year facility in Damietta, Egypt.

Sources generally agreed that these interruptions alone did not fully account for the price increases, and that it was speculative concerns over similar problems in states with larger production capacities that was the real driver.

“It depends if it spreads [from northern Africa] to the Middle East… if there’s no spread then the Q1 price is too high and we should see a decrease,” said a buyer.

Protests in Oman and Bahrain have been met with deadly force from local authorities. Iranian dissidents have been jailed, and there are similar fears for protestors in Saudi Arabia.

Together these countries have a total nameplate production capacity of more than 15m tonnes/year, meaning the consequences of halting production there would be more significant for the European and global methanol markets.

For the time being, most sources said it was very difficult to assess how great an effect the regional unrest would have on the market and that it was a case of wait and see.

“It is very difficult to draw conclusions… everything points to a decrease, except for the Middle East [situation],” said a buyer.

However, some sellers were already envisaging an increase.

“We have not communicated anything to our customers, but it is clear that chances for an increase of the CP are very likely,” said a producer.

No parties had yet begun negotiations, with most saying they would do so in the next week or two.

($1 = €0.72)

For more on methanol visit ICIS chemical intelligence

By: Ross Yeo
+44 208 652 3214

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