US methanol consumers have started to show an increasing level of comfort with the security of supply and appear likely to increase their involvement in spot activity longer term, sources said Friday.
An emphasis on the management of a steady level of supply and the predictability of contract deliveries caused buyers to rely almost entirely on contracted material and allowed for limited interest in spot buying, a source said on the sidelines of the International Methanol Producers and Consumers Association's Mississippi Conference America in New Orleans, Louisiana.
With market sources describing a supply glut in the US after capacity expansions, an interest in increasing spot market involvement has been seen, but it is unclear how long it will take to materialize, sources said.
Spot material constitutes about 5% of the US market, with contract product making up around 95%, sources estimated.
"Buyers should keep their portfolios open for spot," a source said, adding that it would allow significant cost advantages in the current pricing environment.
Consumers receiving material on a contract basis have not been able to take full advantage of the steep price drops in methanol in recent months, a source said. The source added that a contract buyer has weighed renegotiating current contracts to increase spot exposure.
Platts assessed US spot methanol on Friday at 41.75-42.25 cents/gal FOB USG. February contracts stood at 65 cents/gal FOB USG for Southern Chemical Corp. and 75 cents/gal FOB USG for Methanex. With rebates and discounts averaging 13%, the net contract price comes to 56.55-65.25 cents/gal FOB USG.
