Lower Europe methanol spot increases chance of contract rollover

22 June 2012 11:44  [Source: ICIS news]

LONDON (ICIS)--A decrease in European methanol spot prices this week has increased the likelihood of the quarterly contract rolling over at €340/tonne ($425/tonne), buyers said on Friday.

The decrease of €12-15/tonne from the previous weekly spot range is a continuation of a declining price trend that has been present in the market for the past two months.

This trend has coincided with similar price decreases in other chemical markets and the wider energy complex, as well as a general negative economic environment in Europe and globally.

It was preceded by sharp methanol spot price increases, and until around a month ago there was little doubt that the European contract price would increase. Even last week some buyers were still prepared to accept a moderate increase.

Yet the latest developments have effectively removed the possibility of a higher contract price, buyers say.

“A rollover is the best [producers] can hope for. An increase is not on the table,” said one buyer.

Buyers have indicated that their suppliers are now open to the prospect of a rollover. However, producers speaking on Thursday were adamant that an increase is still justified and that the latest spot developments have not seriously undermined their argument.

“The sentiment is poor, and that doesn’t help. But we are still targeting a moderate increase,” said one producer, adding: “The spot price is artificially low.”

On Friday morning one buyer believed an initial agreement could be reached later in the day. Other players said they were in no rush to settle.

The European contract price is settled on a free on board (FOB) Rotterdam basis.

($1 = €0.80)

By: Ross Yeo
+44 208 652 3214

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