US Nov methanol contracts may take big jump because of spot rise

23 October 2013 21:16  [Source: ICIS news]

US Nov methanol contracts may take big jump because of spot riseHOUSTON (ICIS)--US methanol watchers expect a big bounce in November contracts because of a jump this week in spot prices, sources said on Wednesday.

Spot barge methanol prices reached 155 cents/gal earlier this week because of various supply issues in Texas and Trinidad, plus heavy buying by suppliers, sources said. Spot prices closed last week around 150 cents/gal.

This week’s move puts spot at the five-year high set in July 2008. A likely continued push up during the next week makes a 10 cents/gal increase in the November contract a “no-brainer”, as one source puts it.

October postings by Southern Chemical (SCC) and Methanex averaged 162 cents/gal. The expectation of a 10 cents/gal increase stems from discounts off the contract price that are offered to big buyers.

A large buyer predicted a “big surprise at the end of the month”, when Methanex and Southern Chemical Corp. usually make their methanol postings.

“So it looks like November could be jumping 10 cents,” another source said in an email.

Sources cited various supply issues as support for this week’s spot jump.

Ongoing natural gas curtailments continue in Trinidad, which is the source of 60-70% of the methanol imported to the US in any given month.

In Texas, OCI’s methanol plant in Beaumont has had problems this month that have required the plant to be shut down a few times. While the problems appear to be relatively minor, there have been enough of the incidents in recent months to underscore the fact that the OCI unit is an old plant that has been updated.

Finally, another plant restart in Texas, by LyondellBasell in Channelview, has methanol watchers thinking long-term about what prices will do when that plant comes online sometime in November or December.

A trader predicted that the LyondellBasell plant restart would prompt a price decline in early 2014, providing further support for the spot jump this week.

($1 = €0.73)

By: Lane Kelley
+1 713 525 2653

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