Methanol price slide could be temporary

Cost of raw materials continue to climb

by Tom Stundza -- Purchasing, 7/2/2008 8:49:00 AM

With demand in a summer stall, the July contract price for methanol has been rolled over at the June level of $1.58/gallon by producers Methanex and Southern Chemical. Meanwhile, the spot-market pricing has slipped 20¢ to $1.65 early this month. Slumping demand in the domestic housing and automotive sectors and slowing export sales to China has prompted the spot market to drift lower, according to subscription news service ICISpricing.com.

However, the spot-market slide could be temporary as market analysts still project a third quarter spot-price average of delivered product at $1.97/gallon—as compared with $1.89 in the second quarter. A key issue is the inflation attacking raw materials and energy, especially natural gas, used to produce methanol.

Kevin McCarthy, an analyst for Bank of America Securities, says in a report that global demand for such North American-made chemicals as methanol will keep sales strong and boost prices as the summer continues. “There is demand growth from strength in the economies of Eastern Europe, China, India and other parts of Southeast Asia,” he says, ”so those markets will continue to be very strong.”

Meanwhile, there have been other chemicals prices hike sin the marketplace:

• Solvay Chemicals of Houston will increase off-list prices by 6¢/lb for all commodity grades of hydrogen peroxide sold in the U.S. and Canada on July 11. Transportation and raw material costs are rapidly increasing, the company says. Also, “strong export and domestic demand is driving capacity utilization of plant and transportation assets to extremely high levels,” the firm says. 
• The pigments unit of Huntsman of The Woodlands, Texas, will increase prices of all TIOXIDE-brand titanium dioxide pigments sold in North America by 6¢/lb. Huntsman says the price increases are necessary “to address the significant increases in costs of primary input chemicals, energy and freight affecting our industry.”
• KaMin of Macon, Ga., will boost prices of domestic kaolin clay pricing to the industrial specialties markets on August 1. Tom Anderskow, vice president of sales and marketing, puts the increase on “unprecedented increases in energy, fuel and chemical costs” that have outpaced productivity projects.
• Cristal Global on July 1 increased prices by 6¢/lb for titanium dioxide (TiO2) products sold in the U.S. and Canada. This is in addition to the price increases and paper-market product surcharges previously announced twice in June 12.