Atlantic Basin spot methanol liquidity surges in H2 August

US and European methanol spot prices surged sharply in the latter half of August, with US Gulf Coast values jumping nearly 18% and European prices climbing over 14% in a matter of days. Market sources attributed the rally largely to producer-led buying rather than any shift in underlying supply-demand fundamentals, as trading volumes spiked on both sides of the Atlantic.

US

On the US Gulf Coast, spot prices for M1 FOB USG methanol rose 21 cents/gal, or 17.9%, over the Aug. 14-26 period, Platts data showed, with the rally in spot liquidity attributed to buying led by producers, according to multiple market sources.

Platts assessed M1 August spot methanol at 138 cents/gal FOB USG on Aug. 26, up 1 cent on the day, and flat with M2 September.

The late August bull run is "thanks to [a producer]," according to a buyer.

At least 110,000 barrels, about 13,783 mt, of spot methanol have traded in the month's second half, according to Platts data.

Multiple market participants were unable to explain the rally on the basis of fundamentals, with demand unchanged and no outages heard that would impact supply availability.

"It's been all [producer], there have been no production issues," said a trader. "Since the US picked up, Europe followed."

Despite a lack of domestic outages, lower prices in H1 August "didn't fit current conditions," said a producer, who added forward pricing should rise as fourth quarter inventories dwindle in China.

"As China goes, so goes Asia," the producer said.

Platts assessed CFR China methanol down $15/mt day over day at $350/mt Aug. 26, in line with sharply lower domestic prices, above a buying indication at $344/mt CFR China.

September contracts are expected to roll in the Americas, according to the trader, with higher spot prices in the Atlantic Basin also expected to inform fourth-quarter contract negotiations in Europe, according to a second trader.

In the quarter ahead, US sellers are heard to be targeting exports to India and Southeast Asia, which have become premium markets since the disruption of Middle East exports by the war in Iran.

High freight rates have introduced more risk to export discussions, with freight from inside the Strait of Hormuz to West Coast India heard at $90-$95/mt, up from $20/mt prior to the war, according to the producer.

"Even if product gets through the Strait, it is still higher cost," the producer said.

"Freight is the differentiator between deal and no deal," said the second trader.

Platts assessed CFR India methanol down $1.50/mt from the last assessment at $496.50/mt CFR India Aug. 26, for the assessment period of Sept. 15-Oct. 10.

Platts assessed CFR Southeast Asia methanol $6/mt lower day over day at $527/mt on Aug. 26, under a selling indication at $530/mt CFR Southeast Asia.

Europe

The European methanol spot price increased 14.5% over the Aug. 13-21 period, with the steepest day-over-day gains seen on Aug. 20 when prices rose $44.67/mt.

This followed a surge in trading activity on the day, with at least 11,000 mt heard traded – more than total volumes transacted throughout the whole of July

Market participants struggled to rationalize the resurgence in trading, which did not appear to have been driven by any change in supply-demand fundamentals amid a sufficiently supplied European market which had seen little spot buying interest during the month so far.

"I was surprised that the price went up so drastically because stocks in tanks are high and people are asking for extra spot capacity because they are struggling to discharge," said a source at a terminal in the ARA region.

Rather, it was heard from several sources that producers had stepped into the market triggered by deals which had ended a stalemate between buyers and sellers seen during the first half of August, signaling that prices had bottomed out.

Producers were therefore taking the opportunity to fill shortfalls while spot prices remained at a discount to contract, especially considering an ongoing maintenance in the region, according to one market observer.