World methanol market to soften in 1998

Aug. 12, 1996
World outlook for methanol [52307 bytes] Contrary to many earlier predictions, the world methanol market is not necessarily headed for a serious capacity surplus. This is the main finding of a study by Chemical Market Associates Inc. (CMAI), Houston.

Contrary to many earlier predictions, the world methanol market is not necessarily headed for a serious capacity surplus. This is the main finding of a study by Chemical Market Associates Inc. (CMAI), Houston.

CMAI's Executive Vice Pres. James R. Crocco said, "A somewhat soft global industry can be expected for the year 1998, when considering and calculating only those methanol plants that are currently under construction...and further assuming that some of the higher-cost methanol production in East Europe and some other locations will not be able to compete in the world marketplace for the foreseeable future."

In 1998, capacity from plants now under construction will begin to be absorbed by the market, and additional world scale plants will be needed to meet demand.

Demand

The CMAI study predicts a decline in methanol demand growth during 1996-2001. Demand will increase 2.7%/year the next 5 years, compared with 6.7%/year the past 5 years, says CMAI.

World consumption of methanol for methyl tertiary butyl ether (MTBE) production increased 18.5%/year during 1991-96, mostly as a result of oxygenated and reformulated gasoline requirements in the U.S. CMAI predicts MTBE production will increase only 3.1%/year during 1996-2001.

This reduced growth is the result of market saturation and maturing demand for MTBE as a component of oxygenated and reformulated gasoline in the U.S.

"MTBE demand globally is expected to increase only in line with octane requirements," said Crocco. "Only limited mandated oxygenated gasoline is required outside of the U.S., and it is therefore not anticipated that this use will reach significant proportions during the study period."

Derivatives

Demand for all but one methanol derivative is expected to grow at traditional rates, or in line with gross domestic economic activity, says CMAI.

Acetic acid, however, is pegged for 4.5%/year growth because of increased demand for purified terephthalic acid.

"Increased methanol demand for all fuels purposes is expected to be lackluster at best, at 0.7% annual growth," said Crocco, "since crude oil values and petroleum products are still highly competitive vs. methanol. Unfortunately, this sector experienced a dramatic economic shock when global methanol prices reached very lofty levels in 1994 and early 1995."

Supply

World methanol capacity will increase 2.9%/year during 1996-2001, predicts CMAI, compared with 6.1%/year the preceding 5 years.

World scale methanol projects have been proposed in the U.S. (Alabama, Texas, and Wyoming), Mexico, Trinidad, Indonesia, Venezuela, Qatar, Russia, and Lithuania. By some accounts, says CMAI, planned capacity additions for the next 5-7 years could total as much as 13 million metric tons/year.

CMAI cautions that its study discounts these planned facilities and concentrates only on those under construction. The study also factored in closure of about 1 million tons/year of capacity in eastern Europe and assigned lower operating rates to plants in New Zealand that can swing between chemical and commercial-grade product. Commercial-grade methanol is used to produce synthetic gasoline.

If methanol prices increase substantially during the next 5 years, some of the less competitive plants could restart and chemical-grade methanol production may be maximized in New Zealand, says CMAI.

"If this occurs, which is rather unlikely given the capacity utilization rates anticipated, then additional world scale methanol producing capability will not be required to the same degree," CMAI concluded.

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