Methanol is in a period of rapid transition with an overall average annual growth rate of 5.9%, but only 4.9% if the MTO/MTP segment is excluded. While traditional methanol derivatives are growing at average annual rates of 5.7%, fuels applications for methanol are growing globally at 6.5% with applications varying from direct gasoline blending, to DME for LPG blending or a replacement fuel for diesel, to bio-diesel applications, as well as the conventional application in MTBE. Finally, MTO/MTP is fast emerging with yet unknown implications to the merchant methanol market, growing from nothing in 2009 to almost 11 million metric tons of demand in 2023.
The focal point for the global methanol market is China with its marginal cost production setting the global market price. As Middle Eastern producers act as price takers and seek to place material to achieve the highest netback (China price less logistics and duty versus Europe/North America price less logistics and duty), this pricing mechanism creates the regional price movements and relative regional price differentials. China domestic production is adjusted to meet the domestic demand that remains after cost competitive imports into China are absorbed. The cost position of the domestic production cash costs on the global cost curve determines the delivered cost into China and the resulting price in China, as well as the global price setting mechanism. Also, while global methanol demand growth for 2013 to 2023 is projected at 5.9% annually, demand in China contributes almost 80% of the global demand growth with the rest of the world growing at an average rate of only 1.6% annually.
Atlas Methanol Plant in Trinidad, where IGP’s Managing Director of Technology, Dr. Theo Fleisch, was an Advisor to the project from 1996–2000.
As we look into 2014, industry spot pricing is expected to remain below current levels towards $350-$415 per metric ton for all regions. 2011 prices were quite stable compared to historical volatility, with 2012 prices averaging $375 per metric ton globally. In the last quarter, however, a two-tier price situation emerged, with level or slightly decreasing prices in Asia, influenced in part by Iranian imports into China and India, contrasting with price spikes in the Americas and Europe, caused principally by supply issues in Trinidad and Egypt. 2013 may well herald a return to greater volatility. Demand will be influenced by an economic recovery in disparate sectors as well as evolving fuels applications led by a combination of economics and government bio-policies. Supply changes were more predictable in 2011, but supply disruptions and feedstock shortages have come to the fore in 2012 and 2013; with gas restrictions in Egypt and Trinidad, and a price spike in western markets caused by a power outage that temporarily brought down all production units in Trinidad. Finally, as the economic recovery progresses, the overshooting and undershooting of energy prices will likely play a major part in the economics of methanol supply as well as in the attractiveness of methanol for fuels.
Source: IHS Global Methanol Report 2014