Falling prices will soon flatten
By Staff -- Purchasing, 1/14/1999
Prices for synthetic methanol continue to soften, but will begin to flatten by the end of the second quarter, 1999. Despite the downward spiral of contract and spot prices seen in the past two years, rising natural gas and crude oil costs, healthy demand, and decreasing supplies and operating rates will apply upward pressure to stop the price slide.Currently, average prices for bulk methanol contracts are at 51¢/gal, according to data from Purchasing's monthly chemical transaction survey. Average spot market prices are slightly lower at about 49¢/gal. But just one year ago, average contracts and spot tags were fairly even at approximately 74¢/gal.
Buyers' responses to our survey place methanol prices in the next six months at approximately 40¢ to 45¢/gal for bulk contracts and about 45¢ to 48¢/gal for spot tags. Look for prices to stabilize and remain within this range for the remainder of 1999 as demand catches up with decreasing supply and operating rates.
According to Houston-based petrochemical industry analysts, The pace Consultants, Inc., methanol demand for mtbe is expected to continue at a strong level with domestic production growing at about 2% annually. Demand for methanol has also been improving in chemicals and other uses.
Other factors affecting the low prices of methanol include high temperatures in much of the U.S., which has helped to keep the price of natural-gas feedstocks low. Crude oil prices are at near record lows, according to a pace spokesperson, and domestic producers are continuing to improve their cash margins for methanol. In the long term, pace predicts that imports will become a more important component of methane supplies in the U.S.
Domestic production of methanol was down in 1998 to 1.37 billion gallons, according to pace's data. Compared to last year's production output of 1.62 billion gallons, that's about a quarter of a billion gallons less than last year. Also, operating rates for 1998 were down about 10 percentage points since the fourth quarter of 1997 to 56%, according to pace.
The markets for methanol are diverse. It is used primarily in the production of methyl tertiary butyl ether (mtbe), a gasoline additive. Methanol is also used in the production of formaldehyde resins, used in plastics and restructured particle board, and it is a component of acetic acid, which is used to make PET bottles and polyester fibers. Other markets for methanol include paints, solvents, refrigerants, disinfectants, and chlorine-free bleaches.
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