Viewpoint: US methanol supply surplus to persist
Published date: 23 December 2021
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US production of methanol is expected to grow in 2022, with supply sources in the US Gulf coast running at full speed heading into the new year.
The 1.6mn metric tonne/yr Koch plant in Louisiana started up this year, and production hiccups at the 1.7mn t/yr Natgasoline plant in Beaumont, Texas, appear to have dissipated. Other major plants in the US Gulf coast, the 1mn t/yr OCI Beaumont plant and the 1.5mn t/yr Fairway plant in Clear Lake are all operational, as well as the two 1.1mn t/yr plants operated by Methanex in Geismar, Louisiana.
Barring a repeat of a prolonged winter storm in the region and any extended production outages, the US methanol market is expected to stay well supplied, with downward pressure likely to persist.
That pressure had already commenced, as spot prices tumbled to the low-100¢/USG range by mid-December from seven-year highs in October around 160¢/USG.
US methanol contract prices, set by the two largest marketers Methanex and Southern Chemical, averaged 195¢/USG for December, and with the widened gap between the spot price and contract price, these are expected to drop.
If North American supply continues to grow, and with a projected supply excess of 20pc over demand according to Argus Consulting, most of that surplus methanol will be exported to Europe and Asia. Total US production capacity is over 10mn t/yr against demand of 7mn t/yr, Argus data show.
Downstream, demand will likely decline at the onset of the new year with demand slowing seasonally. But firm automotive and housing construction demand should keep consumption steady through the year.
Methanol fuel applications are expected to grow in 2022 and beyond. According to the EIA, biodiesel production is expected to increase by 22pc in 2022 to 127,000 b/d. On 7 December, the US Environmental Protection Agency proposed raising the renewable fuel requirement to 20.77 bn USG in 2022.
US production of gasoline additive MTBE is expected to rise by early 2023 with the start-up of LyondellBasell's TBA plant in Channelview, Texas. Methanol is building block for the production of MTBE.
By Steven McGinn