Iran sanctions contribute to higher European methanol prices

27 January 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--A €3-7/tonne ($4-9/tonne) increase in the spot price of European methanol this week is probably a reaction to the broader sanctions against Iran announced by the EU on Monday, market sources said on Friday.

The sanctions prohibit the import of petrochemicals from Iran, as well as the export of related equipment and technology to the country. Iran has over 5m tonnes/year of methanol production capacity, of which around 500,000 tonnes/year is exported to Europe, with the remainder going to the Asia-Pacific region.

Sources do not expect a severe shortage as a result of the missing volumes, particularly as the terms of the sanctions state that already-concluded contracts can still be executed until 1 July 2012.

Nevertheless, alternative sources of methanol will need to be found and this readjustment could strain the supply chain.

“The Iran situation has contributed to the uncertainty. I don’t think it has had an impact on supply yet but you have to replace those volumes from somewhere and that creates uncertainty,” said a producer.

Sources also noted that the strengthening of the euro versus the dollar this week will likely have mitigated the scale of the price increase. Yet they also believe slight upward pressure is being exerted on prices because of a mild tightness in Rotterdam, which is thought to have resulted from higher-than-expected demand in the first quarter to date.

Many buyers saw a downturn in the fourth quarter of 2011 but have been pleasantly surprised by derivative orders this year.
“[Demand is] not fantastic but it’s better than feared,” said one buyer.

Buyers stress, though, that it is too early to tell to what degree this improved demand is the result of a genuine recovery or simply restocking.
European methanol spot deals took place in the range €282–283/tonne FOB (free on board) Rotterdam this week.

($1 = €0.76)

For more on methanol visit ICIS chemical intelligence

By: Ross Yeo
+44 208 652 3214

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