UpdateEurope Q3 methanol confirmed at €295/tonne, down by €10/t

17 June 2011 16:00  [Source: ICIS news]

(releads with contract confirmation and adds detail throughout) 

LONDON (ICIS)--The European methanol third-quarter contract price has been confirmed at €295/tonne ($415/tonne), down by €10/tonne from the second quarter, after the majority of major market players agreed to the price on Friday.

This follows an initial settlement made between a buyer and a producer on Friday morning. The price is settled on a free on board (FOB) Rotterdam basis.

Sources said the relatively quick settlement – discussions only began in earnest towards the end of last week – and the modest scale of the price change demonstrate the current stability of the market.

A producer said: “It might be, from our point of view, a little on the low side, but really it represents fairly stable pricing with just a slight decrease. Three or four years ago we regularly saw changes of €30, €50 or more, but the last three quarters have been fairly reasonable in development.”

Suppliers had previously been insistent that a rollover at €305/tonne was justified. Many have now conceded that the price is more in line with buyer targets, with one saying: “I don’t think there should have been a change [in the contract price]. There could be a slight summer slowdown [in demand], but I don’t really buy that. This is more or less a favour from the sellers to the buyers.”

However, even buyers pointed out that the change is fairly minor and that it reflects the relative stability of the market. “Down by €10/tonne is not a big movement. The price is okay,” said one buyer.

One of the main reasons that buyers argued for a decrease is the fact that spot prices have been, on average, lower in second quarter than the first.

Another factor is the changes to the euro/dollar exchange rate. Three months ago, when the previous quarterly contract was agreed, the euro was valued at $1.39. At the time of writing, it is slightly higher at $1.41, although sources pointed out that it has been fluctuating between this and $1.46 amid the uncertainty of the Greek debt bailout.

There are widespread expectations, particularly among buyers, that the euro will strengthen further once a bailout for Greece is finalised. In this event, the value of methanol in euros must decrease in order to keep the dollar value steady.

A third, seemingly less influential factor is the possibility of sluggish demand during the summer compared with the rest of the year. Not all players subscribe to this reasoning, however, pointing out that 2010 saw no such downturn.

In any case, most buyers who participated in the contract negotiations voiced a combination of the three factors as justification for a decrease.

Producer Methanex also announced on Friday morning that it is set to post its independent European Posted Contract Price at €295/tonne, which it had agreed with five buyers.

($1 = €0.71)


By: Ross Yeo
+44 208 652 3214



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