Methanol demand not yet affected by ailing end-markets

26 April 2013 14:55  [Source: ICIS news]

LONDON (ICIS)--A major buyer in the European methanol market has expressed surprise that the poor performance of some key end-markets has not had a greater impact on methanol demand.

Speaking on Friday, the buyer singled out the European car industry as an example of a badly performing sector on which the methanol market relies, and said it was only logical that lower car production would mean lower demand for components made, ultimately, from methanol, and therefore lower methanol demand.

While the buyer fully expects methanol demand to be affected eventually, it said demand appeared to be holding steady for the time being.

“I can’t understand how there has been no impact, I can’t explain it.”

A producer highlighted the coatings industry as another that is struggling, while also commenting on the lack of a corresponding decrease in methanol offtake.

“I don’t see it yet, offtake going down. There’s no additional demand, but no decrease either.”

In addition to ailing end-markets, a second producer identified competition with Asian derivative producers as a potential source of demand destruction in Europe, but again pointed out that no decrease in demand has yet been seen.

There currently exists a substantial methanol price difference between Europe and Asia, and European buyers have complained this puts them at a competitive disadvantage in downstream markets, where Asian players can offer lower prices because of the cheaper feedstock.

The producer agreed there was a risk of demand destruction in Europe, but thought the time lag between corresponding events in upstream and downstream markets meant this is unlikely to be seen until around July.

Sources did suggest, however, that decreasing demand for traditional methanol derivatives could be offset by increased production of methyl tertiary butyl ether (MTBE), a gasoline additive.

One supplier estimated MTBE growth could account for as much as 400,000 tonnes/year of extra methanol demand in Europe.

By: Ross Yeo
+44 208 652 3214

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