LONDON (ICIS)--European methanol spot prices have risen to a four-month high on the back of pressure from higher US and Asian values and US-Iran tensions.
- EU spot lift takes lead from global increases
- Downstream force majeure in US adds pressure
- Handful of methanol outages in Asia, Middle East, possibly US
Prices rose in all three major regions - Europe, US and Asia - in the week to Friday 10 January, including a steep lift for Chinese import values.
It marks a turnaround for European pricing, which slumped below €200/tonne before Christmas, weighed by global oversupply and stable-to-weak local consumption, creating a gloomy outlook for margins in 2020.
A combination of overseas outages and political tensions appears to be taking the edge off this.
European trading may also be influenced by higher volumes available for spot sales this year, since spot currently appears better priced for sellers compared to a typical discounted value versus the contract price.
Europe, US, China
Europe's market is stable but feeling the effect of several overseas production issues for methanol and downstream products, which are pressuring US and Asian values.
Local European methanol demand is as expected, but a force majeure in the US from a major producer on vinyl acetate monomer (VAM) and acetic acid may be pressuring supplies around the Atlantic Basin.
LyondellBasell declared force majeure on the products following utility disruption at La Porte, Texas.
Middle Eastern methanol sellers may also prefer to optimise towards Asian and Chinese markets, given possible supply disruption for several plants in the Middle East and Asia, including Petronas' Plant 2 in Malaysia, with early February as a potential restart date.
Any routing or re-routing of material would leave less free to flow to Europe, with further confirmation of this pending.
"China is going to pull away material from Europe. People get more bullish on that," said one trader.
There is also unconfirmed continuing supply disruption in the US.
Market-specific issues are set against a backdrop of international tensions.
"Sentiment-wise, it's [upwards pressure] coming from the US-Iran tension," another trader added.
Should higher pricing persist in Asia, there is interest in whether this could divert imports from Europe.
The influential Chinese market is in a deficit for January, according to ICIS analysis, which is one factor behind the firmness, though it may cool after Lunar New Year.
Weekly European spot prices were at €211.5-225/tonne on Friday 10 January, up €2.5/tonne on the low and €10/tonne on the high.
Methanol is primarily used to produce formaldehyde, methyl tertiary butyl ether (MTBE) and acetic acid.
Smaller amounts go into production of dimethyl terephthalate (DMT), methyl methacrylate (MMA), chloromethanes, methylamines, glycol methyl ethers, and fuels applications such dimethyl ether (DME), biodiesel and the direct blending into gasoline.
Front page picture source: Hans Lippert/imageBROKER/Shutterstock
Focus article by Vicky Ellis