Europe methanol buyers may reduce contract volumes on cheaper spot

02 May 2014 23:59 Source:ICIS News

LONDON (ICIS)--With European methanol spot prices decreasing again this week, some consumers will be considering reducing their contractual intake in order to make spot purchases, sources said on Friday.

Spot prices were assessed at €315-320/tonne ($438-444/tonne) FOB (free on board) Rotterdam for the week ending 2 May, while the European quarterly contract price is €412/tonne FOB Rotterdam.

This contract price is subject to significant discounts, which are confidential between a buyer and seller, but nevertheless all sources agree that net contract prices are higher than the spot range.

Most consumers receive all of their required volumes though contractual supply. Yet with spot material available at so lower prices, sources said it makes sense for them to reduce the amount they receive via contract in favour of making spot purchases.

One consumer questioned the extent to which this is possible, saying most contracts are based on quarterly volume nominations. However, it agreed any consumers that are able to make monthly nominations would probably be considering such a move.

One such consumer said that while it has not reduced its contractual intake, it has good demand and any additional volumes it requires it will source from the spot market. However, it added that if the spot/contract spread persists through May, it will consider lowering its June contractual intake.

“It’s a lot of money,” the consumer said, with respect to the spot/contract difference.

A producer said that while it has not yet seen any change to its contractual offtake, it expects consumers to be looking at the possibility of doing so.

Contractual demand is unanimously described as stable and healthy.

By Ross Yeo