• home
• about us
• services
• reports
• client resources
• news archive
• links
• contact us

March 2005 Headlines

The market remains in much the same balance and condition as last month. The PCI - Ockerbloom & Co., Inc. "Global Methanol Trend Value" for March showed very little change versus the prior month, only being adjusted slightly to $270 USD/tonne. While some pricing did rise slightly versus last month, currency conversions and competitive situations did keep prices nearly stable to down slightly.

US natural gas stock levels continue at a record, but recent gains in crude oil and energy-related products, combined with the recent run of colder weather patterns across much of the US, has pushed gas pricing slightly up again. Following the trend of the slight rise in daily spot gas pricing, the FERC US Gulf-Houston Ship channel natural gas Index was settled up for March to $5.98 USD/Mbtu.

In the US Energy Information Administration's recently released Short Term Energy Outlook for March 2005, the EIA has revised the estimate of natural gas demand growth in 2005 downward from 3.0% to 2.2%. Despite the rise in the US gas rig count, the administration has also revised its projected increase in domestic US natural gas production down from a prior projected gain of 1.6% to only 0.5%.

Despite US natural gas stocks being at record levels, energy pricing is up, with all the focus on higher demand. Very shortly, the US winter demand season for natural gas will draw to a close and inventory restocking will enter the rebuilding period. The March US Gulf-Houston Ship Channel natural gas Index was settled at $5.98 USD/Mbtu. Early signs are for a further rise in April.

The daily US Gulf Henry Hub cash gas price, as of the close of business on 28 March, was $6.93 USD/Mbtu, but there are wide daily swings in pricing. Price strength is being shown in the forward months, as Nymex May, June and July gas prices are moving up marginally to $7.122, $7.232 and $7.322 USD/Mbtu, respectively.

Final estimates of US GDP for Q4 2004 have been announced at 3.8% growth, holding steady with preliminary estimates. GDP slowed slightly compared to Q3's 4.0% growth, this attributed to increased imports during the fourth quarter.

In a surprising move, the Indy Racing League (IRL) announced that, starting next year, it would switch from using methanol as its primary fuel to ethanol. Racecars will use a blend of 10% ethanol and 90% methanol during 2006, before transitioning to 100% fuel-grade ethanol in 2007. The 2005 season will continue with 100% methanol being used.

In Europe, an early Q2 contract settlement (flat at non-discounted €230 per tonne) was heard between two parties who are typically outside of the "majors" negotiation process. The early fixture and process has taken some by surprise. The general consensus is that, while the absolute level might not be wrong, the process and lack of involvement by other majors, not yet being fully engaged in the debate, has delayed a universal acceptance.

The European second quarter non-discounted contract price has now been fairly universally agreed to stay stable at the €230 level posted in the first quarter. This is now four straight quarters in which the base reference contract price has been held stable. Despite these facts, it was not as simple an agreement as it sounds. In the first week of March, nearly everyone was surprised by the sudden and limited single settlement in a second quarter contract price. For the second quarter in a row, the agreement was between a Russian producer/marketer and a major formaldehyde producer at a continued level of €230 per tonne. The early settlement and lack of widespread open debate on the topic by the majors in the industry left some with bad feelings. Once again, the debate over how the European price is fixed has been resurrected.

On 11 March, the European Commission (EC) announced that it would conduct an in-depth investigation into the Blackstone Group's acquisition of Acetex. In its statement, the EC said its "initial market investigation has found that the proposed acquisition may create significant competition problems given the parties' horizontal overlaps in the markets of acetic acid, vinyl acetate monomer (VAM) and acetic anhydride." The undertaking of such an examination does not necessarily indicate the commission's final decision. The EC now has four months to render its final judgement.

Supply outages that were impacting the region are now rapidly drawing to a close. Stocks and regional inventory are still low and need to be rebuilt prior to the stronger seasonal demand in the second quarter. The GPIC Bahrain facility is indicated to have delayed its planned March turnaround and will now take the 3-week shutdown starting in early April. The two Saudi Arabian units (Ar Razi 3 & 4) both returned to production in the first week of the month. The Kharg Island Iranian methanol plant is indicated to still be running at reduced operating rates.

On 23 March, the BP Texas City, Texas refinery (formerly the Amoco Texas City refinery), while in a planned maintenance outage in their isomerization unit, suffered an explosion and fire that unfortunately injured more than 70 individuals and killed 15 people. This facility is considered the third largest gasoline refinery in the US, manufacturing approximately 3% of US gasoline consumed. Chemical operations at the site were not believed to be affected. Market reaction and initial impact were geared more toward the speculative impact on gasoline and MTBE pricing, especially with the start of the spring blending season. As gasoline reacts up in price, it is pulling MTBE values upward.

On 15 March, BP and Sinopec announced that they would be going forward with a 50:50 acetic acid project in Nanjing, Jiangsu, PR China. They have also stated intentions to form a joint venture company for the plant. The two companies had signed a heads of agreement for this project in May 2004. The plant will use BP's CATIVA® technology and is expected to come online in the second half of 2007.

US housing starts continued to run hot in February at 2.195 million units, seasonally adjusted, up 0.5% from January's revised 2.183 million units. All US regions, except the South, saw increased starts. Meanwhile, building permits were down nearly 3% from January, with February reported at 2.074 million units, seasonally adjusted. With the Federal Reserve having just added another quarter of a point to the nation's key interest rate, bringing it to 2.75%, and more increases predicted for the coming months, the US housing market is anticipated to cool in the near-term.