Methanol Report
(An Analysis by Roger Moyers)

If consistency is preferred, the methanol market is where you would want to be. This is especially true on the methanol pricing front. The contract prices for March have once again rolled, making this the fourth month in a row prices are unchanged. Once again the monthly contract prices posted by Methanex and Southern Chemical Corporation will remain at USD 1.10 and 1.08 per gallon respectively. There has not been a great deal of movement in the spot “barge” prices either. The spot methanol price has continued to trade in the mid USD 0.90’s per gallon, while trading in the outer months of April and May show a little softness, but still nothing earth shattering. Although demand has improved slightly, and unplanned outages globally have really had no influence on methanol balances, it proves the supply / demand picture is certainly in a balanced position. As the great philosopher, Yogi Berra, once said “projections are very hard, especially when it involves the future”, so our price projections going forward are a daunting task. We believe the added global capacity coming to the market in Q3 of this year will place pressure on pricing. We may see spot prices move to the USD 0.80’s per gallon during this period. As always, we can never look past China as their buying habits can always disrupt a perfect supply / demand balance scenario.

The methanol distribution business has also remained steady as we enter the final month of Q1. Although the oil and gas sector for methanol distribution is showing signs of falling off for the year, it has been a good run for methanol for this winter season. The continued cold and snowy weather seems to be hanging on, particularly in the Northeast, so the windshield wash business may enjoy a prolonged season. No complaints here! As we have noted throughout 2009, and it is even more relevant today, there remain those marketing companies, and opportunistic trading houses that continue to place no value on distribution ethics or market stewardship, but instead treat each gallon of methanol they sell into the market as another “spot market” transaction, with total disregard for overhead cost(s) and future consequences. While this concept of “maverick” selling is good for the buyer, the volatility of a commodity such as methanol will swing in the other direction at some point in time, and those without a supply relationship with a viable / experienced methanol distribution company will find themselves without supply.

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IPA Report
(An Analysis by Ron Munos)

There is clearly an up momentum in the market. Chem Grade propylene has strengthened to 62 c/lb for February. This was a 6.5 c/lb increase from January, and all producers have implemented their March 1 IPA increases of 5-8 c/lb. Prices are all over the map and will take a few days to settle. Most buyers realized the increases were real and filled their tanks, so there are not a lot of orders in play right now. Producers are reportedly quoting in the mid-high 70’s for rail cars with trucks 2 c/lb higher on a net delivered basis into the Distribution Market. All three majors are reported to be at these levels.

Some reports of product being offered in the low 70’s on an FOB basis. There are also some scattered reports of imported product quoted in the high 60’s. Since prices were just increased, it will take a few days for things to sort themselves out.

With crude close to $80/bbl and natural gas below $6/MBTU, light cracker feeds are still favored. This should keep supply pressure on propylene. In fact, one propylene producer has reportedly already nominated a 5 c/lb increase for March. However one questions how long propylene can stay at such a lofty level without some adjustment to a heavier cracking slate.

IPA is said to be good supply currently even with the low propylene avails. There are some signs the economy is showing some improvement which could help demand.

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Heavy Aromatics Report
(An Analysis by Ron Munos)

The market seems to be quiet, not a lot of action in the price arena. Sun reported adjusted their prices down in mid February, but others did not follow. Supply appears to be balanced to tight as Flint Hills is in the middle of their maintenance downtime and is not interested in chasing low end prices. Reformers are still cut back due to low gasoline demand and a small crack spread. Even with the low reformer rates, gasoline inventories were up again last week according to CMAI and are at the top of their 5 year average according to the Energy Information Agency (EIA).

Inventory is expected to remain snug for the next couple of months due to strong sales into the Ag Chem sector and the operational issues referenced above.

Aromatic 200 is tight and most likely will remain so through April. It could experience additional price pressure prompted by tight supply. Since there are only two producers, data points are few, but prices seem to start in the mid-high 60’s on an FOB basis.

A-100 and A-150 are reported priced from the mid-high 40’s on an FOB Houston basis for A-100 with A-150 a couple of cents higher. However, we will soon enter motor gasoline season and with the switch to summer grade fuel, octane may become more expensive and result in some price pressure on these molecules.

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