Rollover, slight increase likely outcome for Q3 Europe methanol

15 June 2012 14:31  [Source: ICIS news]

LONDON (ICIS)--Producers and consumers negotiating the European methanol third quarter contract have indicated that the price is likely to settle between a rollover and a slight increase.

Speaking at the sidelines of the International Methanol Producers and Consumers Association (IMPCA) meeting in Wiesbaden, Germany, on Friday, where contract discussions have got under way, sources do not expect there to be a quick settlement as they wait to see the outcome of Sunday’s Greek parliamentary election and for further clarity on the market situation.  

Recent widespread commodity and energy price falls have changed the market picture somewhat from around a month ago, when there was little doubt that the contract price would increase.

Now, these predictions have been revised down, and although there remains much uncertainty, most players expect to see either a rollover or an increase of lesser magnitude than in the second quarter (€20/tonne).

“They [producers] are listening, at least, to the idea of a rollover. If things had remained as they were a month ago, I don’t think this would happen,” a buyer said.

Producers believe than an increase is still justified, citing the high European spot price throughout the second quarter, the weaker euro, the need to maintain global price parity and the lost Iranian supplies resulting from US and EU trade sanctions.

Yet buyers, while accepting the factors above, point to the dire state of not just the European but the global economy, and the effect this will have of eroding demand.

One key area of disagreement is Chinese demand. Buyers routinely point out that the Chinese methanol market is sluggish, by normal standards, as prices there have fallen even with a sharp reduction in imports from Iran.

A producer said reports of lower Chinese demand need to be taken in the context of its extraordinarily high demand previously.

China is still growing at 7.5%, which means methanol growth of over 10%, which is another 2.5m tonnes/year,” said the producer.

Nevertheless, prices globally have decreased significantly over the past few weeks (although the European market has remained more or less stable), and buyers insist this is grounds for a rollover at least.

Some have even suggested that if spot prices continue falling, a contract decrease could be on the cards.

The second quarter methanol contract was settled at €340/tonne ($430/tonne) FOB (free on board) Rotterdam.

($1 = €0.79)

By: Ross Yeo
+44 208 652 3214

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