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January 2005 Headlines

Firm methanol pricing in December largely carried forward into January, with only slight differences impacting the overall trend. In general, higher methanol pricing entering the new contract year, along with a slight increase in market competition, has resulted in some varying trends on contract discounting. The impact of discounting, the stronger US dollar, and marginal price increases in regional markets resulted in a nearly stable global trend value. The Ockerbloom & Co., Inc."Global Methanol Trend Value" (GMTV) for January was adjusted to $270 USD.

The December natural gas monthly indexed contract price was fixed nearly $1.00 USD lower than last month. At that time, above normal weather patterns in much of the US, combined with the declining price of crude oil and high gas stock levels, helped push down daily cash and forward futures natural gas pricing. The perception of a rapidly firming natural gas price to levels above $7.00-8.00 USD/mmbtu has not yet materialized on a consistent basis, but with cold weather patterns developing here, the future is still being debated. The December FERC US Gulf - Houston Ship channel natural gas Index settled at an elevated level of $6.33 USD/mmbtu.

The European market remains very subdued and quiet at this time. Russian production units are recovering, freeing up some additional volume. With global spot pricing in near equilibrium, very little spot activity is witnessed, except for the occasional export parcel to the US. The bid/offer level on both T1 and T2 spot product has declined slightly, with only a few real trades to note. Domestic European producers feel the market is balanced and should not suffer greatly from the recent and pending shutdowns in the Middle East.

In early January, Mitsubishi Corporation and Mitsubishi Gas Chemical announced plans to carry out a feasibility study on a second methanol unit at the Metor site in Jose, Venezuela. The proposed 850,000 tonne/year unit would essentially slightly more than double methanol production capacity at the location for the Metor Group. Later in the month, Pequiven announced that the Metor II project would indeed be going forward, with a recently signed letter of intent and potential natural gas agreement. This proposed second unit has a targeted online date of 2008.

Scheduled maintenance outages at selected plants in the Middle East will impact the level of competitive bidding on spot parcels, as the incremental volume will be limited for the next several months. The Ar Razi IV plant is understood to have just entered a 3-4 week turnaround. The Ar Razi III plant is planning a 3-4 week shutdown just after the middle of the first quarter. The Bahrain facility (marketed by SABIC) will also go down at the end of the current quarter. The Fanavaran facility in Iran has also been mentioned as reviewing another brief shutdown at a later time. Kaltim Methanol announced plans to shut down its Bontang plant for 30 days during the second half of 2005.

US MTBE production fell slightly over 10% from October, with the Energy Information Administration, Department of Energy (EIA DOE) reporting November output at 468,000 tonnes or 3.96 million barrels. Stocks increased 8% to finish November at 578,000 tonnes/4.89 million barrels, while demand rose nearly 4% to 514,000 tonnes/4.35 million barrels/145,000 barrels per day.