Houston — Falling methanol prices in the US have narrowed the premium over the European market, closing the trans-Atlantic arbitrage on paper this week, S&P Global Platts data showed.
The inter-regional spread, which hit a multi-year high at around $70/mt April 1, has since dropped to around $20-$25/mt, which is insufficient to cover freight costs.
Freight costs between Rotterdam and US Gulf for easy liquid chemicals were last assessed at $38/mt for 5,000 mt parcels; however bigger, 10,000 mt, parcels could be fixed at lower rates, closer to $30/mt, according to a source.
Despite the closing arbitrage, sources said that they expected more cargoes to be fixed out of Europe to the US. So far, at least two cargoes have been moved to the US East Coast from Rotterdam, and two more 10,000 mt cargoes were heard potentially heading to the US Gulf from Libya, according to sources.
US April prices have shed 11 cents since the beginning of the month, last assessed Thursday at 100 cents/gal ($333/mt) FOB USG for April and 98 cents/gal ($326.34/mt) for May. Despite the fall in prices, US market remained backwardated.
If traders buy molecules in Europe now, considering the typical shipping time, they would arrive to the US at the very end of April/early May.
US spot methanol prices have softened since a spike in late March and early April, when a fire at Intercontinental Terminals Co.’s facility in Deer Park, Texas, hampered logistics in the Houston Ship Channel. While ITC is one of the primary terminals for spot methanol, logistics have normalized over the course of the month and spot pricing has come down, with trading heard at alternate terminals like St. Rose and Texas City, both along the US Gulf Coast.
As recently as Wednesday, trading activity for ITC was heard for the forward month, with May trades reported at 100 cents/gal FOB ITC and 98 cents/gal FOB ITC. On Thursday, the May bid-offer range was heard at 95-100 cents/gal FOB ITC. No activity was heard for April.
In the meantime, methanol in Europe was traded several times this week at Eur265-270/mt FOB Rotterdam for April loading dates and was last assessed at Eur268.50/mt Friday ($303.81/mt).
Several sources said that there was upside potential in Europe now as a lot of tons have been shipped out, helping to balance out the market. In addition, there were renewed concerns over the imports from Venezuela, which are likely to disappear amid ongoing power cuts in the country. One producer said he did not expect that this loss to be offset by the volumes out of the US due to remaining logistical issues. Further upside push was likely to come from the rising crude oil prices, if olefins prices move higher, another source said.
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Source: S&P Global Platts