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February 2005 Headlines

The PCI - Ockerbloom & Co., Inc. "Global Methanol Trend Value" (GMTV) for February showed very little change versus the prior month, adjusting upward only slightly to $271 USD/tonne. While some contract pricing did rise slightly versus last month, currency conversions and competitive pricing did keep prices from escalating greatly.

The natural gas monthly indexed contract price held fairly stable from January to February. Cold weather patterns have been infrequent and any upward price pressure appears to be offset by the influence of the higher levels of natural gas in storage. The February FERC US Gulf-Houston Ship channel natural gas Index settled at a nearly flat level of $5.74 USD/mmbtu, a decline of only $0.01 USD from January's fixture. Natural gas prices are still being influenced by the corresponding higher price of domestic crude oil. West Texas Intermediate crude oil closed on the 11th of February at $47.02 USD/barrel.

Despite record inventory levels of domestic US natural gas, the stable month-to-month indexed January to February price is showing signs of rising slightly entering March. Cold weather patterns have been frequent during the past few weeks, driving up near-term and forward future pricing. The February FERC US Gulf-Houston Ship channel natural gas Index settled nearly flat at $5.74 USD/MMbtu, a decline of only $0.01 USD from January. Natural gas prices are also being influenced by the corresponding higher price of domestic crude oil that has had some additional strength lately.

The US Department of Commerce has released trade data for December 2004. As anticipated, monthly import volumes for the final three months of the year rose significantly over last years's levels, resulting in 8.4% growth for 2004. Methanol imports rose approximately 365,000 tonnes over 2003 to approximately 4.74 million tonnes or 1.57 billion gallons. The US Customs district of Houston and New Orleans accounted for 68% of the volume. Imports from combined South American sources accounted for nearly 75% of the US total.

Production problems are impacting Eastern Europe. Russia's Tomsk methanol unit (750,000 MT/year) went down at mid-month with compressor problems, with its return projected for the end of February. The Azot methanol plant (400,000 MT/year) also went down unexpectedly early this month, with its return predicted for late February/early March. The Kikinda methanol/acetic unit shut down early this month with problems relating to the extreme cold weather in the region and is expected to remain down for 60+ days. During the outage, MSK plans to also carry out the maintenance programme it had scheduled for later this year, explaining the lengthy closure. Meanwhile, production outages in the Middle East (two in Saudi and two in Iran) are only slightly affecting the European market. Most of the impact is in the Mediterranean and Asian markets. Within days, the two units in Saudi are to return to production.

During a recent investor conference, Methanex CEO Bruce Aitken expressed the company's desire to complement its current production hubs of Chile and Trinidad with one in Egypt. A few details of the joint venture methanol unit were revealed, including a potential capacity of 1.3 million MT/year and completion of the financial details being projected and voted upon by the end of 2005. Some funding is to be committed to studying the project in 2005.

Year-ending methanol imports into China totaled approximately 1.3585 million tonnes, a decline of about 3.1% from the prior year. Monthly methanol imports for November and December 2004 totaled about 91,000 and 116,000 tonnes, respectively. The increase in Chinese methanol production volumes, in combination with the rising price of imported spot methanol versus the domestic offer price, has seemingly put a cap on imported product. Many regional marketers feel that the further increase in domestic production volumes, again in combination with the current price, only allow for contract volumes to move into this market at similar levels for 2005.

The US Energy Information Administration, Department of Energy (EIA DOE) has released December's MTBE production and stock totals. Total 2004 US MTBE production fell approximately 22% versus the prior year, a loss of 1.6 million tonnes of MTBE or about 590,000 tonnes of methanol demand. US MTBE imports declined 26%, while exports rose nearly 10%. Total estimated US MTBE demand fell 26.5% to 6.5 million tonnes.

Borden Quimica Industria e Comercio S.A. (Brazil) has announced plans to build a formaldehyde and resins unit in Rio Grande Do Sul, Brazil. No start-up date for the 125,000 tonnes/year formaldehyde unit was given. Borden Chemicals' board of directors has approved the construction of the facility, which will "serve the rapidly growing engineered wood products market in southern Brazil and northern Uruguay." Also announced this month, Dynea and BorsodChem Rt will double capacity at their joint venture BCKC Formalin plant in Kazinbarcika, Hungary, bringing total formaldehyde production at the site to 120,000 tonnes/year by the end of 2005.