Europe methanol contract price must fall in Q4 - major buyer

14 September 2012 16:09  [Source: ICIS news]

LONDON (ICIS)--The European methanol contract price should decrease in the fourth quarter because of a stronger euro versus the dollar, a large buyer said on Friday.

Compared with three months ago, the euro has strengthened by $0.027. This means if the European contract price were to rollover at €340/tonne ($442/tonne), the value in dollars will have increased by just over $9/tonne.

The buyer believes this it not justified and that the contract price in euros should decrease to compensate.

However, sellers have largely dismissed this claim as unreasonable, with one producer branding the proposal as "ridiculous".

A supplier and trader noted that crude oil prices have increased over the past two quarters and that, with recent actions taken by the European Central Bank and the US Federal Reserve, the European and US economies no longer appear bearish.

“[Methanol] was undervalued anyway. Q4 is traditionally stronger than Q3 and the world economy looks better,” the trader and supplier added.

Additionally, there are a number of plant turnarounds taking place in Trinidad during the late-third and fourth quarters, which may tighten the Atlantic.

Buyers disagreed with the view that the fourth quarter is usually stronger than the third, pointing out that December usually sees heavily reduced activity because of the holiday season. Furthermore, many companies undertake inventory destocking in order to enter the new year with lower working capital.

For this reason several other buyers suggested a slight decrease could be justified.

Nevertheless, all suppliers were adamant that the contract price should roll over at minimum, with perhaps even a slight increase applied.

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

($1 = €0.77)

By: Ross Yeo
+44 208 652 3214

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