Q1 2007 Market Commentary

I would like to take this opportunity to wish you a very happy peaceful and safe Christmas

 

Please find attached some comments on where we think the markets will go in Q1 2007. Information is from a variety of sources including suppliers. These are just indications rather than exact predictions. If you have any comments or we can help with anything else, please let us know.

We will probably publish this commentary on our website in the near future but I will inform of the details at a later stage

 

Methanol:

Methanol prices are predicted to continue their upward movement and Q1'2007 NWE contract prices are expected to be approx. €45-65 per tonne higher than Q4. Producer inventory levels have not recovered after several Force Majeure declarations in Q3 and the market remains very tight and basically surviving on a day to day basis. There are planned shutdowns during Q1 in Trinidad, Europe and Asia which will tighten supplies even more. Expect this tightness to continue into Q2 2007. Longer term, China is seeking to approve Methanol to meet its future fuel needs (as either a 15% or 85% blend in gasoline) and this could have serious impact on future Methanol supplies

 

Acetic Acid:

Due to high methanol feedstock costs as outlined above, Acetic Acid manufacturers could raise prices by €30-40/tonne in Q1.

 

Ethanol:

Various cracker problems have been resolved but demand in Europe remains strong especially for fermentation Ethanol into the EC bio-fuels programme. Supplies in Europe have tightened significantly and prices are expected to increase by up to €200/tonne during Q1/Q2 2007.

 

Ethyl Acetate:

European production is back to normal and prices have fallen during November/December. The market is seeing better availability of product, sources said. Looking ahead, prices may stabilize at current levels as anticipated drop in feedstock ethylene would be offset by firm prices in the acetic acid market,

 

Isopropanol

Reports of poor margins, especially in Q3 and Q4 2006, may balance any drop in propylene prices as producers continue to hold continuing firm price levels in IPA. Producers are not expected to track the projected fall in feed stocks.

 

Acetone

Most commentators are predicting a static Acetone market with expectations of lower propylene numbers being balanced as producers were looking to maintain current price levels to recover from very poor margins. Supply-demand fundamentals will dictate value going forward. Pharmaceutical-grade acetone is said to carry a 10-20% premium over current normal-grade acetone.

 

Toluene

European market appears balanced and therefore no major movements are forecast. However as we enter the driving season this could put extra demand on the gasoline pool and therefore increase Toluene numbers.

 

THF (Tetra Hydro Furan)

Strong demand and reduced production will fuel increases in THF prices on top of increase in raw materials (Methanol & Maleic Anhydride). The announced mothballing of a new poly-THF plant in China (at significant cost) will draw on European & US THF production as demand into textiles increases. Demand into the pharmaceutical area is ever increasing and the question will be can end-users secure THF for the production of their valuable API's.

 

Best Regards

Pat Short

Eirchem

A division of Brockley Group Limited

Tel +353 1 8392016

Fax+353 1 8392869

Mobile +353 87 2426720

www.eirchem.com

 

Q4 2006 Forward Price Projections

Some comments on where we think the markets will go in Q4 2006.These are just best guesses at the moment and should be taken as indications rather than exact predictions.

Methanol:

Methanol prices have jumped up substantially in recent weeks due to force majeure in place at both AMPCO in Equatorial Guinea and MHTL's M5000 plant in Trinidad, taking a large amount of methanol out of the global market. Both plants are due to restart mid/end September but no indications when force Majeure will be lifted. Increases in Q4 NWE contract prices are expected to be approx. €170 higher than Q3.

Acetic Acid:

Due to high methanol feedstock costs as outlined above, Acetic Acid manufacturers could raise prices by €75-100/tonne in Q4.

Ethanol:

Ineos' KG cracker problems at its Grangemouth plant in Scotland, have resulted in difficulties sourcing ethylene feedstock for synthetic Ethanol production. Demand in Europe also remains strong especially for fermentation Ethanol into the EC biofuels programme. Supplies in Europe have tightened significantly and prices are expected to surge by approx. €200/tonne over Q4'2006 into Q1'2007.

Ethyl Acetate:

Following BP's force majeure at its Hull plant in early July, due to difficulties sourcing ethylene feedstock from Ineos' Grangemouth plant in Scotland, Ethyl Acetate supplies in Europe have tightened significantly with prices surging by approx. €300/tonne over July/August/September. BP's site is also due to shut for a month-long turnaround in mid/end September and a plant in Spain is also planning a maintenance shutdown shortly. Demand in Europe remains strong. This scenario coupled with rises in Acetic Acid prices due to methanol shortages could lead to further increases of approx. €100/tonne going into Q4

IsoPropanol:

Perceptions of increased demand coupled with propylene tightness and plans to bring down a plant in Germany for three weeks from mid-October to early November in that month has seen prices increase by €50-75/tonne. Looking forward, producers were reported targeting a Eur30-50/mt rise in the fourth quarter in anticipation of a hike in feedstock prices in Q4

Acetone:

An upward movement in acetone prices is anticipated going forward due to a mixture of planned and unplanned outages at production facilities in Poland, Italy and Germany. An unspecified maintenance shutdown in South Africa during autumn would result in limited imported volumes being made available in the European market. Meanwhile, pharmaceutical-grade acetone was said to carry a 10-20% premium over current normal-grade acetone.

BP has permanently closed its Hull, UK, unit at the end of July.