Europe prompt methanol restricted; Q1 demand unexpectedly strong

03 February 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--European methanol demand in the first quarter of 2012 has been stronger than many market players expected, and prompt material has consequently become slightly tight, several sources said on Friday.

Many buyers experienced a downturn in derivative demand in the fourth quarter, and were pessimistic about the prospects for January and February. As a result of this poor demand, many buyers destocked their inventories as a precautionary measure against a more sustained slump. Following this destocking, the market has been caught out by surprisingly good offtake so far in 2012.

“I think stocks were low at the end of Q4, and demand was okay, but not fantastic. In January, demand was better, and people got caught out,” said one imported material trader/marketer.

A producer seconded this: “[Demand] has been better than expected so far. Customers were a bit sceptical regarding Q1, but they have been positively surprised.”

“[Demand] is fairly healthy. In Q4, there was a bit of drop-off, but it’s picked up again. It’s in line with [the corresponding time in] 2010, 2011,” one buyer told ICIS.

While most sources agreed with the comments above, there were some that saw little change in demand from the fourth quarter. However, these are the generally the same players that did not see much of a downturn at the end of 2011.

There are widespread reports of some vessels being delayed into Rotterdam, in the Netherlands, and some sources believe this is the cause of the tightness. However, many believe that most – if not all – of the volumes on board are already allocated, and will not increase availability when they arrive.

“I’ve had two vessels come in, but no volumes to sell [in the spot market] – it’s all allocated,” said the trader/marketer.

The tightness is not severe, and spot prices have increased only marginally, by €2/tonne ($2.6/tonne) on the high side of the range, to €282–285/tonne FOB (free on board) Rotterdam. This in itself might not be a hugely significant increase, but players point out that spot prices are already at fairly high levels when compared with the European contract price.

Sources report that much of the buying is being done by global suppliers, which are presumably short on their contractual obligations. Current spot prices are only 11–12% below the Q1 contract price of €320/tonne, which, when assuming an average contractual discount of 15%, means suppliers that buy in the spot market are making a loss, another trader observed.

($1 = €0.76)

For more on pricing intelligence visit ICIS pricing

By: Ross Yeo
+44 208 652 3214

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