LONDON (ICIS)--European methanol spot prices continued to decrease this week, losing €4-10/tonne week on week, primarily because of weakness in the Asia Pacific markets, sources said on Friday.
The decrease takes the European market to its lowest point in almost five months, with prices hitting €379/tonne FOB (free on board) Rotterdam.
Key to the falls has been the ongoing weakness in the Asia Pacific markets that has opened up arbitrage opportunities with Europe and the US.
Material has started to be booked from Asia to Europe and the US. In addition to the 50,000 tonne cargo reported last week, booked from southeast Asia to the US Gulf for delivery in the second half of April, a 25,000 tonne cargo has loaded in Iran for delivery to a European port in the Mediterranean.
This is understood to be the first Iranian cargo booked to Europe since the EU imposed petrochemical trade sanctions on the country in May 2012.
A cargo was also rumoured to have been booked from southeast Asia to Rotterdam.
A consumer noted that even with the decrease, European prices are still at historically high levels. The market reached its highest level since early January 2008 two weeks ago.
“€379/tonne is still a pretty good price for producers, they have pretty good margins,” the consumer said.
Producers and suppliers insisted the price decreases in Europe were the result of traders speculating, and that those that have sold themselves short on April material could be caught out.
“I can’t see the fundamentals behind [the price drop],” said a supplier.
However, one producer also acknowledged that material will arrive in Europe from Asia, and that prices will likely fall at some point during the second quarter on the improved supply.
Other suppliers were adamant that three domestic plant turnarounds scheduled for the second quarter will balance out this influx. But others said the impact of these will be mitigated by the fact that they are scheduled and preparations have been made and believe European supply will increase nonetheless.
Underlying the weakness in Asia is improved production rates and poor demand, with the latter not restricted to methanol. As such, sources said a reversal in price trends in the short term is unlikely, barring another production problem.