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April 2005 Headlines

The PCI - Ockerbloom & Co., Inc. "Global Methanol Trend Value" for April is beginning to reflect the pressure of the developing weaker price in Asia. While functionally showing very little change versus the previous month, being adjusted down to $268 USD/tonne, it is a short-term directional indicator.

Optimism for the global economy has grown more cautious, as seen in the latest announcements by the European Commission (EC) and the International Monetary Fund (IMF). The European Commission recently announced in its Spring 2005 Economic Outlook that it was estimating only 1.6% growth in GDP in the Eurozone for 2005, after 2004's 2.0% growth. For the European Union, the EC quoted 2004 GDP at 2.4%, with 2.0% growth expected in 2005. The IMF released its World Economic Outlook this month, forecasting global GDP at 4.3% for 2005, down from 2004's 5.1% rate. While growth is slower than hoped in many areas, some areas are running too hot, as seen in the Chinese government's recent report of Q1 2005 GDP growth of 9.5%, fanning inflation fears in that country.

The April 7th release of US natural gas stocks by the US Energy Information Administration (for the week ending 1 April 2005) showed the end of the winter withdrawal period, as stocks began moving up, at least for the moment. Despite the stock build, colder weather patterns in the last week of March combined with higher crude oil pricing to push the US Gulf-Houston Ship Channel Natural Gas Index for April to $7.01 USD/Mbtu, the highest level in five months. As of the close of business on 11 April, the daily US Gulf Henry Hub cash natural gas price was $7.19 USD/Mbtu.

The April 28th release of US natural gas stocks by the US Energy Information Administration (for the week ending 22 April 2005) showed further strong recovery in stock levels for the fourth week in a row. Despite the stock build, surprise spring snowstorms combined with the higher crude oil pricing to push the US Gulf-Houston Ship Channel Natural Gas Index to $7.01 USD/Mbtu at the start of the April, the highest level in five months. For the week ending 22nd April, US natural gas stock levels were at 1416 Bcf (billion cubic feet), up 73 Bcf from the previous week, 29% greater than the 5-year average, and 23% greater than the level posted for this week last year.

The Titan plant in Trinidad took its first major maintenance turnaround during April with a planned 30-day shutdown. The Methanol Holdings Trinidad Limited (MHTL) MIV plant will be out for approximately three weeks in May. The SuperMetanol plant in Venezuela will be taking a 3-week shutdown, tentatively scheduled to start the first week of May. Despite reports to the contrary in early April, Methanex's Chile IV plant is still not in operation. In a recent statement, they indicated that the plant was just now finishing its commissioning phase. If there are no further delays, they estimated initial start-up would begin in approximately two weeks, but that volumes would not greatly impact in the second quarter.

Spot fixtures continue to be infrequent, but have moved down slightly in price with increasing trader interest. The majority of spot buying is still co-producer driven, while consumers remain largely removed from visible participation. Marketers and producers note that there has been little noticeable shift in market fundamentals, but they feel traders are seeking increased liquidity and movement in the spot market to create activity. The Mediterranean market is still tight, with ongoing production limitations in Libya, reduced volumes from Eastern sources, and diversions of product to the Indian and Asian markets to capture higher prices.

Several shuttered methanol plants, one in Europe and others in the Americas, are being evaluated for purchase and relocation to different sites in Asia. The old ICI plant was heard to be under review for potential movement to either Iran or Indonesia. The Yihua Group of Inner Mongolia, China, has revised the planned capacity for the slated natural gas-based methanol project in Erdos, China. Initially, the methanol production addition was estimated to be 400-450,000 tonnes/year, based on the size of a closed US methanol plant they were planning to move. Following the purchase of a second shuttered US methanol plant (600,000 tonnes/year), they have increased planned total new production at the site to 1.0 million tonnes/year. The US plants are currently in the dismantling stage and will be reassembled, with a planned restart in China targeted for June 2007.

The Yihua Group of Inner Mongolia, China has revised the planned capacity for the slated natural gas-based methanol project in Erdos, China. Initially, the methanol production addition was estimated to be 400-450,000 tonnes/year, based on the size of a closed US methanol plant they were planning to move. Following the purchase of a second shuttered US methanol plant (600,000 tonnes/year), they have increased the planned total new production at the site to 1.0 million tonnes/year. The US plants are currently in the dismantling stage and will be reassembled, with a planned restart in China targeted for June 2007.

There has been some progress on US energy legislation, as the House of Representatives passed its Energy Policy Act of 2005 (H.R. 6) by a vote of 249-183. The bill includes the controversial proposal to open the Alaskan Wildlife Refuge (ANWR) for drilling, as well as over $8 billion USD in energy-related tax breaks. Despite attempts to strip the language from the House's bill, limited liability protection for MTBE and ethanol is also included in H.R. 6, along with provisions to ban MTBE (although states would be granted the option to continue use), provide financial assistance to MTBE producers as they cease making the product, and eliminate the 2% oxygenate requirement. Further, the legislation promotes ethanol blending with its Renewable Fuels Standard, requiring 5 billion gallons of ethanol be introduced into the nation's gasoline pool by 2012. While the House's approval process went smoothly, the bill may see a bumpy road ahead. The US Senate is scheduled to start work on its own version of the energy bill in mid-May. After that, the real fight will begin when the House and the Senate work to reconcile their two proposals.

In the middle of April, Jiangsu Sopu once again had to shut down its acetic acid unit in Jiangsu, PR China, due to continued mechanical problems. The unit has had a troubled run thus far in 2005. In January, two trains suffered an outage, before returning to limited production in February. Further mechanical problems shut the unit down again for a few days in March, after which it was running at reduced rates.