04 October 2012 16:20 [Source: ICIS news]
LONDON (ICIS)--The increase in European methanol spot prices this week has been caused by tight supply resulting from a recent outage at a major plant in Egypt, sellers said on Thursday.
Canadian producer Methanex’s 1.3m tonne/year plant in Damietta, Egypt, was shut down in late August when its gas supply was cut off by the government. The company recently announced the plant had been restarted again in late September.
However, other suppliers have cast doubts over whether the plant is running at high rates or if the company still has a shortfall to make up in its European supply chain.
“Although they say that they are back, nobody knows really if they run at full speed or at reduced rates,” said a producer.
Spot prices increased when news of the outage initially broke, around mid September, but they then decreased again before climbing once more this week.
According to suppliers, this is because many traders in the market did not fully appreciate the extent to which the market was short and the full impact the Egypt outage would have.
“A lot of traders did not understand how tight the market really is and had sold themselves short, so there is a lot of short covering going on,” the producer said.
When asked why prices had decreased while the plant was still widely known to be offline, a trader/supplier said; “very simply it's sentiment, as half of the people reporting or trading this market don't get their hands dirty to dig into the nitty gritty [of supply and demand].”
Between the close of last week and Thursday prices have increased by €7/tonne ($9/tonne).
($1 = €0.78)
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