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MARGINS REGAN HARTNELL loNDoN

Spot rises ease margin squeeze

The edging up of spot chemical prices in Europe and Asia has relieved recent margin compression, according to ICIS weekly margin reports. European spot ethylene prices have risen by 21% by the week ending January 20 since bottoming out in November. The value of spot co-product credits for each tonne of ethylene produced increased by around 25% over the same time period. Correspondingly, spot ethylene margins have reached a six-week high of 292/tonne ($377) since averaging 44/tonne in October. Spot margins are often a leading indicator of the possible direction of future contract margins. Contract ethylene margins, which better reflect how most European ethylene production is performing, average 174/tonne so far for January. As fixed costs per tonne of ethylene produced are generally about 100/tonne, this demonstrates the pressure European producers have been under. Spot ethylene margins in Asia rose to $142/tonne for the week ended January 20, having reached a low of minus $185/ tonne in November. Spot ethylene prices in Northeast Asia have risen 16% from their November low and the value of coproduct credits has risen by 22% over the same period. Contract pricing is less common in Asia. Similar scenarios can be seen in the US for naphtha crackers.
SPOT MARGINS TICK UP
Ethylene margin, $/tonne
1,200 1,000 800 600 400 200 0 -200 Jul 2011 Jun 2012 European (naphtha) Asia (naphtha) US (naphtha) US (ethane)

Gas supplies determine Methanex plant restarts

The Canada-based methanol producer is making moves in global production
Canadian methanol producer Methanex has confirmed plans to move one of its idled plants in Chile to Geismar, Louisiana, in the US. Site-specific engineering work has begun and the plant is expected to be operational in the second half of 2014. Bruce Aitken, CEO of Methanex, said: The outlook for low North American natural gas prices makes Louisiana an attractive location in which to produce methanol. We have a number of parallel work paths ongoing and expect to make a final investment decision on this project in the third quarter of this year. The project will cost $400m (312m) much less than constructing a new plant, which Aitken estimates would cost $700m or more. Aitken said that Methanex is talking with gas suppliers about long-term contracts, but he added that gas prices are so low in the US now that he is not wor-

MethANoL ELAINE BuRRIdGE loNDoN

Only one of four plants at Methanexs Cabo Negro site is running is running because of problems securing consistent supplies of natural gas. head of research with US analyst Alembic Global, said that although Methanex could move a second plant to the US, he does not expect such a move in the near term. If they move another facility, it certainly will require a fair bit of capital and I dont see that happening until at least 2016 or beyond, he said. Steve Hansen, analyst at Canada-based investment bank Raymond James said moving a second
MethANeX MethANoL PLANtS (000 toNNeS/YeAR)
LocAtIoN cAPAcItY

there is strong demand growth for methanol and little new production capacity being added
BRuce AItkeN CEO, Methanex

SOURCE: ICIS

ried about it. We would be happy to proceed with this project without a gas supply contract, Aitken said. The timing of this project is excellent: there is strong demand growth for methanol globally and there is little new production capacity being added to the industry over the next several years, he added. Methanex has four methanol plants at the Cabo Negro complex in Chile, but only one plant with a capacity of 850,000 tonnes/year

SecoNd Move PoSSIBLe One US analyst believes Methanex could move a second plant from Chile to the US. Charles Neivert, analyst at US-based investment bank Dahlman Rose said he has been told that the property Methanex has purchased in Geismar, about 60 miles (97km) south of Baton Rouge, could easily accommodate two methanol units. We expect that there is likely to be another announcement later this year to move a second unit to the US, following closely on the heels of the first, Neivert said in his research note of January 18. Neivert added that two plants could be moved for $500m600m. Paying for the move would not be an immediate concern, Neivert said, because of the two to three years it would take. Theyve certainly got the cash flow to pay for this, he added. Methanex restarted a plant in Medicine Hat, Alberta, Canada, last year for around $45m and has already recouped that cost. Hassan Ahmed, partner and

Medicine Hat, Alberta, Canada Cabo Negro, Chile Cabo Negro, Chile* Cabo Negro, Chile* Cabo Negro, Chile* damietta, Egypt Motonui 1, New Zealand** Motonui 2, New Zealand Waitara, New Zealand* Point Lisas, Trinidad Point Lisas, Trinidad
*

470 850 800 925 975 1,300 850 850 530 1,800 900

idle **to restart by mid-2012 SoURCE: ICIS

16 | ICIS Chemical Business | January 30-February 12, 2012

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Methanex