Global methanol market oversupplied - consultant

Source: ICIS News

2008/12/09

LISBON (ICIS news)--The global methanol market has entered a period of oversupply amid further signs of downward pressure on prices, an industry consultant said on Tuesday.

Record oil prices and a failing economy have had a significant negative impact on methanol, with supplies now outpacing demand, said CMAI’s Dave McCaskill at the 2008 CMAI World Methanol Conference in Lisbon, Portugal.

Adding to downward pressure are multiple production plants starting up worldwide, with prices possibly falling further, McCaskill said.

“Nearly 37m tonnes of new capacity is scheduled for start-up over the next five years,” McCaskill said.

Prices will eventually rebound because of expected cuts in production by high-cost producers, he said.

Similar to what happened in North America, where production plants closed due to uneconomic production costs, McCaskill said he expected the same to happen to the global methanol market.

“Low-cost producers will cut out high-cost producers,” said McCaskill.

Methanol prices may continue to fall, McCaskill said, and are now searching for a cash-cost or energy-value floor.

“Wherever [prices] settle, we’ll see a bounce,” McCaskill said.

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