Europe methanol spot activity heavily subdued

10 July 2014 16:07 Source:ICIS News

LONDON (ICIS)--The European methanol spot market has been extremely quiet this week, with no deals confirmed and only tentative bids and offers made, feedback up to Thursday showed.

Interest from traders was thin and this has been attributed to uncertainty over the direction in which prices will move next. This lack of confidence has led to few traders being willing to take positions.

End-users have no incentive to buy in the spot market given that spot prices are now more or less at parity with the net contract price. Contractual offtake is stable and regular.

Contractual suppliers have also not been active on the buy side, and there do not appear to be any with deficits to cover.

Although the market is still long, those with material to sell appear to be holding out for renewed buying interest and higher prices.

Many in the market are waiting to see whether the 1.3m tonne/year EMethanex plant in Damietta, Egypt, will run in August.

The plant is currently offline because feedstock gas has been diverted for priority electricity generation, which peaks in the summer months because of increased cooling needs. While the plant’s supplier has said it cannot guarantee gas will be available before the end of July, market sources feel there is a good chance the shortage will persist into August, given this is the hotter month.

If indeed the plant does remain offline through August, sources expect the plant’s marketer, Methanex, to become active on the buy-side of the spot market to replace the lost volumes.

Such buying activity could potentially push prices up, or at least would give the market some liquidity.

Sources have also suggested holidays have been partly responsible for the quiet activity.

By Ross Yeo