European methanol buyers no longer resigned to higher Q3 price

08 June 2012 16:14  [Source: ICIS news]

LONDON (ICIS)—An increase in the European methanol contract price for the third quarter can no longer be taken for granted, following recent decreases in global spot prices, buyers said on Friday.

The European spot market began softening last week and prices have since fallen by €15-21/tonne ($19-27/tonne). Prices in China have decreased by $13-18/tonne week-on-week, while US prices have fallen by 3 cents/gal.

“Every week until today I have said we will see an increase. Today, I have said we will see either an increase or a rollover,” said one buyer.

Another buyer went further and said a decrease is now possible. “The situation has changed a little bit…globally. The US came down, Asia came down, now it’s completely open. Now we can move for a decrease.”

The lower spot prices come amid increasingly negative news and sentiment regarding the European and global economies, falling energy prices and concerns over the effect this will have on methanol demand in the near future.

However, while producers and suppliers in Europe acknowledge the decreases in Asia and the US, several believe those in the European market were only possible because of a lack of liquidity and are the result of a buyer offering down prices.

Those on the sell side are still confident that the contract price will increase, citing reasons such as the weakening euro against the dollar, the need to maintain pricing parity with Asia, and a second quarter price which may of been considered too low.

In addition, the ongoing trade sanctions against Iran continue to impede resupply to various global markets. While this should, in theory, have a tightening effect on the market, it has been more difficult in practice to see what the exact impact has been.

The first buyer conceded that, even though a rollover is now possible, it still sees an increase as the most likely outcome.

Contract discussions are expected to begin in earnest next week at the International Methanol Producers and Consumers Association (IMPCA) meeting in Wiesbaden, Germany.

($1 = €0.79)  

By: Ross Yeo
+44 208 652 3214

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