FocusEurope methanol buyers split over Q4 demand prospects

28 September 2012 11:41  [Source: ICIS news]

By Ross Yeo

LONDON (ICIS)--European methanol buyers are divided over fourth-quarter demand prospects, and as such the decision to roll over the quarterly contract price has met with both approval and dismay.

Buyers can more or less be spilt into two groups: those who feel demand is likely to remain steady over the coming quarter and who approve of the stable pricing; and those who expect demand to decline and who therefore feel a contract price decrease would have been appropriate.

On closer inspection, it appears one of the key factors leading to this divide is the varying level of buyers’ downstream exposure to the automotive industry, which is currently experiencing negative growth.

According to data from the European Automobile Manufacturers’ Association (ACEA), new passenger car registrations were down by 8.9% in August, having fallen 7.8% in July. Indeed, this latest fall is the 11th consecutive monthly decline.

“We expect [methanol] volumes to be decreasing in Q4. It’s because automotives are doing badly. I understand other [methanol] applications are more buoyant, but not ours,” said a producer of butanediol who relies heavily on automotive end users. The source forecasts its fourth-quarter methanol consumption to be 25% lower than last year.

Of course, there are other factors in play as well. The butanediol producer also noted that the total fourth-quarter demand tends to be lower than other quarters because of the holiday period in December, as well as end-of-year inventory optimisation that often takes place.

This sentiment is shared by many methanol buyers. “What happens in December? That’s my main concern,” said another buyer who is otherwise confident of stable demand during the rest of the quarter.

Another buyer said: “Current demand is not so high…December is a half month, I think some [downstream] plants will shut down.”

On the rolling of the contract price, the butanediol producer said: “I believe we might end up with a spot price which is lower than the net contract price.”

While many other methanol consumers share this bearish outlook, a large proportion expects to see stable demand. It is worth noting, however, that no participants are under the illusion that demand will growth in the immediate future.  

“Demand is flat; there are no real reasons to change the contract price,” said a producer of resins that go into the woodwork and construction industries. 

“Current spot development has been stable, demand looks stable for Q4; overall we have stable development. [This is] important, customers don’t like volatility,” said another buyer.

The quarterly European contract price for methanol will roll over at €340/tonne ($442/tonne) FOB (free on board) Rotterdam. The price is valid from 1 October until 31 December.

($1 = €0.77)

By: Ross Yeo
+44 208 652 3214

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