UpdateMethanex Europe Q2 methanol price at €305/t, down €20/t

17 March 2011 17:26  [Source: ICIS news]

LONDON (ICIS)--Canadian producer Methanex will post its independent European methanol second quarter contract price on Friday at €305/tonne ($424/tonne) FOB (free on board) Rotterdam, a decrease of €20/tonne from its first quarter price, a source with the company said on Thursday.

The agreement was made with six consumers, three of which confirmed immediately. Confirmation from the remaining buyers is pending.

The source said the volumes contracted with the consumers were equivalent to approximately 2m tonnes/year.

Methanex posts its quarterly prices independently of the rest of the market. Although the prices are usually similar, Methanex posted €325/tonne for its European methanol first quarter contract price in 2011, compared with the market consensus of €315/tonne.

Although the company predicts European demand to increase in the second quarter by 4%, it also intends to bring online additional production capacity totalling 1.77m tonnes/year - with a new 1.3m tonne/year plant at Damietta, Egypt and the 470,000 plant at Medicine Hat, Alberta, Canada, which was shut in 2001 because of high feedstock natural gas prices.

There is also a general perception that the first quarter price has been too high and that Europe needs to be brought more in line with the Asian and US markets.

Additionally, the disaster in Japan could cause a certain level of demand destruction, although this is difficult to assess accurately at this early stage, the source said.

Acting in the opposite direction is the ongoing conflict in Libya which is keeping the country's 600,000 tonnes/year of methanol production offline. Meanwhile, violence in Bahrain, may threaten to shutdown the country's 420,000 tonnes/year of capacity.

There are also concerns that uprisings against the government could spread to Iran, Saudi Arabia and Oman, which have a combined capacity of over 15m tonnes/year.

“There’s a lot of uncertainty, but I think an increase was too optimistic…I think €305/tonne was a sensible number to give,” said the source.

Despite the decrease, some players considered €305/tonne to be too high.

“We have started discussions [for the European methanol first quarter contract price] and have plenty of time. I don’t understand the rush [of Methanex]. We will settle towards the end of the month and it will be below €305/tonne. €305/tonne is too high,” a buyer not involved in the Methanex agreement said.

The buyer added that the European contract price will settle somewhere between the European methanol fourth quarter 2010 price, which was €277/tonne, and €300/tonne.

($1 = €0.72)

By: Ross Yeo
+44 208 652 3214

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