Prices dip in spite of supply concerns.(METHANOL)

The July contract natural gas reference price was settled early in the month, at $7.00/mmBtu for Texas, and $7.13/mmBtu for Louisiana, up $0.83/mmBtu on average from the June contract price.

On paper, it seems that methanol demand is outpacing supply in the near-term, as a combination of ongoing outages and curtailments in South America and the recent shutdown of capacity in the US Gulf has led to a significant loss of supply, at least until the Trinidad M5 plant is up and running. At the same time, demand seems good. MTBE production is running flat out, as is acetic acid. Formaldehyde is likely to be trimmed back, which is typical of the summer, but major producers continue to say they are safely taking contract volumes. And yet, to the puzzlement of many methanol producers and marketers, the spot price took a noticeable dip recently in somewhat limited trading.

For June contract price settlements, official posted reference prices remained the same as for March-May, at $0.95-0.98/gallon. Month-on-month spot prices in the US Gulf decreased again, by about $0.06, to an average of just over $0.79/gallon ($263/5). CMAI's contract net transaction price for June has included a very slight decrease to $0.933/gallon (nominal $310/t), down one tenth of a cent compared to the May posting.

European markets continue to operate smoothly and normally. Demand is subject to the usual seasonal considerations, as many facilities in the formaldehyde sector close for maintenance during July and August. Methanol demand is therefore a little off maximum, but this is not unexpected for this time of the year. High ambient temperatures across much of northern Europe have also forced at least one producer to reduce production rates.

Excess domestic methanol production in China and lacklustre demand across the entire Asian region continue to fuel bearish sentiment and drive spot methanol prices lower there. Methanol production in southeast Asia is also reported to be good, all but eliminating any sense of supply pressure in the region. The momentum of the last many months continues as overall methanol demand, market sentiment and methanol prices continue to weaken in China. Demand remains weak in the formaldehyde sector as producers have/are reducing operating rates and selling prices to counteract declining ...