US spot methanol rises on higher contract, short-covering

Focus article by Bobbie Clark

HOUSTON (ICIS)–Stability in the methanol spot market came to a halt after the US contract settled slightly higher at the end of February, with Southern Chemical Co (SCC) posting a 1 cent/gal increase, while Methanex went with a rollover for March.

There was also sentiment in the market that the worst of the winter weather was over, which led to some destocking.

Cold weather affects methanol prices because the product is made from methane, which is also burned as a fuel to heat houses. Methanol is also a key component in anti-freeze, which is in high demand during the winter months.

A source said the latest cold front caught a lot of buyers off guard, so they jumped into the market, sending methanol prices to their highest level since mid-January, when prices were at an average of 112 cents/gal. The US spot methanol price was assessed at an average of 108 cents/gal on 6 March.

The start-up of Methanex’s Geismar 1 plant in Louisiana also gave some market players confidence that supplies were going to be more ample going forward, but that plant has not yet reached its full capacity of 1m tonnes/year.

Additionally, downstream acetic acid production has been stable to higher over the first couple months of the year. Acetic acid has been supported by the increase in vinyl acetate monomer (VAM) production.

A source said methanol spot prices may have hit bottom, even with the influx of Chinese methanol set to hit the market this month. Those imports will not impact the market as heavily as once thought, another source said, now that prices in China and Europe have also started to rise.

The spot market came to life after the contract posting, as spot deals were done at progressively higher levels through the week ending 6 March. A trader said outages at LyondellBasell’s Channelview plant and OCI’s Beaumont plant, both in Texas, forced some buyers into the market at the end of February.

The LyondellBasell plant, which has a capacity of 780,000 tonnes/year, has since restarted. OCI’s plant, which has an annual capacity of 730,000 tonnes, is set for restart at the end of March.

Methanol demand was a bit stunted through the first two months of the year, as several methyl tertiary butyl ether (MTBE) plants went into turnaround in the US Gulf. This loss in methanol demand helped to mitigate the loss in production.

MTBE production has already started to return to normal, with one plant back up. Another MTBE plant was said to be on schedule for start up at the end of March, while the third outage may be down longer than originally expected.

Methanol imports have remained steady, with the normal volumes coming from Trinidad and additional cargos incoming from China. A source said US methanol supplies could become long in the coming months if imports do not decrease, as plants come back from turnaround and new capacity comes on line.

There are seven methanol plants in the US. The producers include LyondellBasell, Methanex, OCI, Air Products and Chemicals, Eastman Chemical and Praxair.

The following shows US spot methanol prices.