21 June 2013 17:42 [Source: ICIS news]
LONDON (ICIS)--The initial European methanol third-quarter contract price settlement has not yet been confirmed due to a lack of consumer support, sources said on Friday.
Numerous consumers said they could not support the statement, announced earlier this week at €390/tonne ($513/tonne), a rollover from the second quarter. The price does not address wide cost gaps between Europe and Asia, consumers said.
Consumers that export their methanol derivatives must compete with Asian counterparts, who have access to significantly cheaper feedstock. European consumers say that they face either operating at vastly reduced profit margins in order to stay competitive, or losing out on sales.
While suppliers insist that European methanol demand has not decreased, consumers say it is only a matter of time before demand erosion occurs as a result of the Europe-Asia price differential.
“With this price gap to Asia, demand won’t remain at expected levels… we are struggling. The current price [gap] is definitely not healthy,” said one European consumer.
Most consumers acknowledge that European spot prices are high and that the market is on the tight side. However, they argue that the threat of serious demand destruction as a result of uncompetitive pricing means that measures should be taken to address the imbalance between the Atlantic and Asian markets.
The current price spread between the second quarter net European contract price - assuming an average discount of 15% - and the average Chinese spot price is $85/tonne.
While the vast majority of European methanol is supplied via contracts, in China most material is sold in the spot market.
($1 = €0.76)
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