Europe methanol softens as economic concerns outweigh tightness

17 May 2012 12:31  [Source: ICIS news]

LONDON (ICIS)--European methanol spot prices have retreated by €10–12/tonne ($12.66–15.19/tonne) over the past three weeks because bearish sentiment is outweighing bullish market fundamentals, a trader said on Thursday.

In the weeks preceding the recent decrease, prices had risen sharply as the global market became increasingly tight under the influence of trade sanctions against Iran, a major producer. Increasingly, sellers of Iranian material are unable to secure vessels or insurance for shipments to the key Asia markets, and the effect has been both a physical restriction on supply as well as speculative concerns over future availability.

The result in Europe was a €23–24/tonne hike over a three-week period.

The increases soon stalled, however, but many players initially saw the pause as only natural after such a sharp increase, and tightening conditions were expected to soon precipitate further price gains.

No such continuation of the upward trend occurred, however, as the market was soon feeling the effects of an opposing influence. Renewed concerns over the European economy and the fate of the eurozone were followed by a sharp drop in crude oil and energy prices, which in turn triggered lower methanol prices in the globally influential Chinese market.

These factors have, largely, affected sentiment on the European market, as opposed to the tangible nature of tight supply. Nevertheless, it is the former that is exerting the greater influence.

“I think sentiment is bearish, fundamentals bullish. But the latter will probably not come in to effect for a month or so. Macroeconomics are a big wild card which we have to watch closely,” said the trader.

($1 = €0.79)


By: Ross Yeo
+44 208 652 3214



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