The recent rise in crude oil prices and the continuous push higher in the Chinese methanol market are complicating negotiations over the contract price for methanol deliveries in Europe in the first quarter of 2107, sources said Tuesday.
The contract price was widely expected to rise from the current level of Eur248/mt ($263/mt) FOB Rotterdam, with talk about the likely extent of the move higher.
“Q1 CP will be definitely above Eur300/mt. There will be a significant, around 30%, rise. Judging by the spot prices and other regions, the Eur330-340/mt might be possible,” a consumer said.
Other sources have recently pegged the potential range for settlement at Eur330-350/mt.
Spot methanol prices in Europe have risen around 45% since the end of October to Eur308/mt FOB Rotterdam trade Tuesday.
If the contract price was to settle at the current spot level, with the addition of the typical-for-this-year contract rebate of 18%, the contract price would equate to Eur375.60/mt, or a $127.50/mt rise from Q4.
Sources said the Q1 CP should close the existing price gap between Europe and other regions to restore the region’s supply-demand balance.
In Asia, Methanex’s December contract price was up $40/mt at $350/mt, while in the US its December price is $1.10/gal ($366/mt), up 14 cents/gal.
“It is a difficult round of negotiations. We will take time, so the settlement is likely to be reached next week,” a second consumer said.
With Chinese methanol-to-olefins production recently setting the sentiment for global markets, all eyes were on rising crude oil prices which could improve the units’ economics and, hence, support methanol prices.
“I see more stable olefins prices in Q1. MTO margins are already very slim,” the consumer said.
