Europe methanol players split over new contract price

05 April 2013 17:41  [Source: ICIS news]

LONDON (ICIS)--Players on both the buy and sell sides of the European methanol market have expressed dissatisfaction with the contract price for the second quarter, after it was settled this week at €390/tonne ($506/tonne), up €20/tonne.

Particularly strong opposition to the increase came from a handful of buyers.

Consumers’ primary objection to the increase is the price gap between Europe and Asia, and the disadvantage this was causing them in derivative markets. One buyer said that even in Europe it was now facing stiff downstream competition from Chinese companies that are enjoying the benefit of cheaper feedstock methanol.

Now that this Europe-Asia differential has increased, some buyers fear their derivative sales will be damaged to the point of reducing their methanol requirements.

One large French buyer said: “In the current depressed demand environment in Europe, the methanol contract price increase for Q2 is hardly bearable for most methanol consumers.”

Most suppliers, on the other hand, felt the contract price should be determined purely by supply and demand fundamentals, and as such should have been higher. Suppliers said they had seen no evidence of declining demand, while supply in the Atlantic region continues to be problematic.

One producer said it was important to bring the European contract price into line with US contracts, which stand at $511-517/tonne FOB (free on board) for April.

One trader/supplier said: “I think buyer[s] got a good bargain again.”

Another producer agreed that, based solely on supply and demand, the increase should have been higher, but said it had taken its customers’ concerns about demand into account, and felt €390/tonne was a fair compromise.

The European contract price for methanol is settled on an FOB Rotterdam basis.

($1 = €0.77)

By: Ross Yeo
+44 208 652 3214

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