Falling water levels on the River Rhine, the main inland European shipping artery, have so far had no impact on the European methanol market, with spot prices hitting an 11-week high.
Methanol's spot price was last assessed at Eur211/mt (around $236/mt) FOB Rotterdam, up 11.6% up from August lows and back to the highest levels this year, last seen in mid-June.
Global outages, redirection of vessels from the Middle East to Asia, combined with healthy offtake and strong US pricing have propped up the spot market in Europe.
Water levels at the town of Kaub, Germany, -- an important choke point -- were seen at 140 cm at 05:00 local time (0300 GMT), down 5 cm from Friday's levels, according to the German waterways service's website.
"Rhine levels are not desperate yet, barges can still run -- 1,000 mt barges still run, though subject to destination," a trader said, adding however that 2,000 mt barges were loading reduced volumes.
"We expected it already in summer. It shouldn't be a surprise. [If it falls] below 1 meter, then there [will be] an issue. Some barges can't go past Kaub south, maybe 2,000 mt barges might struggle," a second trader said.
Last year critically low Rhine water levels obstructed transit of various products, including methanol, from Rotterdam up the river. This resulted in a significant overhang of the material around the ARA hub and its acute shortage inland.
The low Rhine levels accelerated price declines in Rotterdam amid the oversupply. Prices were Eur290/mt at the end of July 2015, before the Rhine depth dipped below the critical 1 meter level. By mid-November the spot price fell by around 20-22% to Eur225-230/mt FOB Rotterdam.
The inability to transport full bargeloads at the time also propelled freight rates and reduced the availability of barges.
According to the latest weather forecasts, there is expected to be little to no rain around Kaub in the next three weeks.
