Initial Europe Q4 methanol agreed at €315/tonne, up €20/tonne

15 September 2011 18:15  [Source: ICIS news]

LONDON (ICIS)--An initial fourth-quarter European methanol contract price has been agreed up by €20/tonne ($27/tonne) at €315/tonne between a buyer and two producers, the parties involved said on Thursday.

The primary reason for the increase is the high level of spot pricing in the US and Asia relative to the third-quarter price in Europe, which is a net import market. Producers consider closer parity between the regions essential to preventing imports from falling.

European methanol contracts are settled on a free on board (FOB) Rotterdam basis.

Deals in Asia were seen as high as $410/tonne CFR (cost & freight) China this week, while US barge pricing was around 120 cents/gal FOB (free on board) (€288/tonne).

Buyers have been recently citing concerns over weakening demand as a mitigating factor when considering the scale of any increase. Some buyers have reported volume decreases in the range of 15-25% from projected levels in October.

One of the producers said; “demand seems to be slowing down. It’s no panic, but yes, it had slowed down over the Q3, Q4 period, and this has been taken into account. But there’s no denying that global prices are high".

“When you look at the macroeconomics I don’t believe any increase is justified. But I admit that Asia is very strong and we may need to align Europe. The suppliers were very bullish,” the buyer involved added.

The agreement may come as a surprise to many participants who had earlier said they feared negotiations could drag on, given that buyers and sellers have contrasting views.

It is unclear what level of support this early agreement with receive from other market players. However, sources regularly state that a quick and early settlement is beneficial for all involved, which could be an influential factor.

Furthermore, a global producer had previously quoted $320-325/tonne as its target price, meaning many buyers may see this agreed price as an attractive alternative.

($1 = €0.73)

By: Ross Yeo
+44 208 652 3214

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