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Russian methanol shipments into the EU will be prohibited for a couple of months, which will give member states time to discover substitute sources of supply.

On June 18, the EU's ban on methanol imports from Russia will go into effect. It was originally scheduled to go into effect at the beginning of January but was instead announced in October as a part of the eighth set of EU economic measures on Russia.

In response to Russia's invasion of Ukraine in February, a number of international sanctions have been imposed against it, including the ban.

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The original phase-in of the prohibition, which was to last three months, was prolonged to an additional eight months.

This was necessary to give some industries in some EU member states extra time to finalise contracts to diversify their supply. Methanol imported into the EU from Russia under contracts finalised before October 07, 2022  is subject to the prolongation and eventual prohibition.

Following a resolution made by the EU Council, the extension was published in the EU Official Journal on December 16, 2022. A justification for the extension was not given by the journal. It happens at a time when the market is anticipating a price increase and a turnaround at Equinor's 900,000 mt methanol unit in Tjeldbergodden, Norway, in early February.

Since January 13, 2023, spot methanol prices have been rising, with just a slight decline on January 24, 2023. The FOB Rotterdam five-to-three-month methanol spot price was estimated by market analysts at EUR 344/mt (USD 374/mt), up 13.7% from EUR 302.50/mt, but down EUR 1.75/mt from the previous day.

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Russian methanol imports are still strong for the time being. According to the most recent data from Eurostat, the EU imported 98,200 mt in October, which was 8,300 mt more than the amount imported in October 2021. For the first 10 months of 2022, volumes stayed within the average range of 90,000 to 130,000 mt.

With at least 42,000 mt of agreed-upon volume for the eight trading days up to January 24, spot trading has remained active. Russian volumes have previously taken the place of Equinor's volumes.

Declining Natural Gas Prices are the Main Factor for Falling Methanol Prices

Since natural gas is largely used to generate methanol, weak demand and low natural gas prices have significantly lowered the price of methanol in the market.

As the mild winter weather continued to reduce demand for heating fuel, the US natural gas prices fell 8% to their lowest level in over two years.

The price of gas was close around USD 2.81 per million Btu, the lowest level since April 2021.. The most recent natural gas price is down more than 70% from the August high of USD 10.03.

After concerns were raised last year that Europe wouldn't have adequate supply for the bitterly cold winter months, the significant decline in natural gas prices marks a stark reversal.

Global energy markets were originally upended by Russia's invasion of Ukraine as a result of Western sanctions and Moscow's retaliatory cutoff of gas supplies. However, the US and Europe's mild winters have contributed to further pricing pressure by reducing demand.

The US gas output has increased at the same time, increasing supplies. Additionally, a longer-than-expected shutdown at a crucial Texas natural gas export facility has reduced exports to Europe and increased US stocks. Additionally, even with Russian supplies still being shut off, gas reserves appear to be strong for next winter as well because they have not been used up as much this winter in the Northern Hemisphere.

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According to data from the Commodity Futures Trading Commission, hedge funds have become the most pessimistic on US natural gas in almost three years.

As per Procurement Resource, the month of February is expected to see a 3-5 percent drop in methanol pricing due to falling natural gas prices. Weak demand and cheap natural gas costs have drastically cut the price of methanol on the market because natural gas is primarily utilised to produce methanol.