OUTLOOK ’14: Methanol watchers look for price drop in January

24 December 2013 22:00  [Source: ICIS news]

HOUSTON (ICIS)--Methanol veterans expect spot barge prices to drop in the first few months of 2014 because of more production coming online in the US.

Some expect only a temporary correction from the run-up in spot and contract prices in late 2013, stemming from tightened supply in Trinidad and the pull of higher prices in Europe.

Others see a more long-term drop because of supply/demand fundamentals.

Stock analyst Steve Hansen at Raymond James in Vancouver takes the temporary view, predicting a short-term correction for spot and contract prices in early 2014 because of LyondellBasell’s restarted Texas plant that should begin shipping material in the first quarter.

Another factor behind the correction stems from assurances by Trinidad’s energy ministry that ongoing natural gas cutbacks for petrochemical producers on the tiny island will end in 2014.

That could mean no more obstacles from the tiny Caribbean island that supplies roughly 70% of all US imports each year.

However, Hansen thinks methanol prices will eventually take off again and start what he calls a “stronger-for-longer” trend.

That trend will undoubtedly stem from the growth of the US methanol industry, which is still dependent on foreign imports, but in another two or three years, most likely will not need to import 5m tonnes of methanol annually.

That’s because of about half a dozen new methanol plants slated for construction in the US and Canada during the next few years, the attraction being cheap natural gas made possible by the shale revolution.

The upside to the renaissance of the US methanol industry is no need for imports, making the US more self-sufficient.

But the downside has generated little attention. Make more of something and, provided there is no significant change in demand, the price should go down and not up.

One industry veteran referred to such reasoning when telling an anecdote about cocktail chatter he heard at an industry conference in Houston, where the discussion had come to focus on new methanol plants being built in Texas and Louisiana.

“You ask people what that means for prices, and they always say, ‘higher, higher,’” he said. “I just don’t see how.”

Another industry veteran sounded jaded when discussing a recent new-plant announcement in the US.

“I think the whole thing is getting old,” he said. “So we will make 40m tonnes of methanol and just drink it, I guess.”

Methanol watchers look for price drop in January

By: Lane Kelley
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