European methanol spot prices increase on tight supply

12 October 2012 12:15  [Source: ICIS news]

LONDON (ICIS)--European methanol spot prices have continued rising this week because of tight supply, sources said on Friday.

Ultimately, this tightness has been caused by interrupted production, in particular the shutdown of Methanex’s 1.3m tonne/year plant in Damietta, Egypt, from late August to late September.

However, sources believe the tightness was exacerbated by traders who did not fully appreciate its extent, and who sold short in expectation of spot prices falling.

In particular, traders took the news of Methanex restarting its Damietta plant two weeks ago to mean European supply would increase and prices would fall. Instead, availability has not increased and traders have been forced to buy back at higher prices, according to one supplier.

There are suspicions among suppliers that the Damietta plant is not running at high rates.

“The market is really tight…traders were trading off headlines [of Methanex restarting the Damietta plant] but the market was tight. Prices took a little time to catch up but now you’re seeing the effect,” said one supplier/trader.

“It’s short, people need to cover themselves and there are few sellers in the short term. [Traders] thought prices would go down,” said a buyer.

The buyer believes there is a good chance of supply increasing by the start of November but the supplier said this is unlikely to happen until late November or December.

“I think the tightness will roll forward…little to no resupply coming back on second half October. Maybe second half of November or December we’ll see it loosen up, but let’s see,” said the supplier.

Spot methanol traded at €315/tonne ($409/tonne) FOB (free on board) Rotterdam on Friday, up from €303/tonne a week earlier. The previously weekly increase was €3-5/tonne.

($1 = €0.77)

By: Ross Yeo
+44 208 652 3214

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