New Brazil methanol plant not likely - companies

19 October 2007 00:15  [Source: ICIS news]

By Stefan Baumgarten

TORONTO (ICIS news)--Brazil is not likely to build up more methanol production capacity despite rising domestic demand and its trade deficit in the product, two industry sources said on Thursday.

A new facility would create oversupply and was, at this time, not a viable option to meet Brazil’s demand, according to Jose Fernandez, commercial manager with methanol producer Prosint and Jose Modolin, an executive with chemicals maker RoyalPlas.

Brazil was currently producing some 300,000 tonne/year of methanol and consuming 600,000 tonne/year, the executives told ICIS news from the sidelines of the 2007 Methanol Forum in Toronto.

Demand growth for methanol was primarily driven by its use in downstream wood-related chemicals products, said Modolin. That sector was seeing strong growth mainly due to the shorter time for trees to grow in Brazil’s tropical climate, compared with other regions, he said.

Fernandez and Modolin also pointed to the increasing use of methanol in biodiesel, where it is used as a re-agent.

Fernandez said methanol requirements would increase to 80,000 tonnes/year in 2008 from some 54,000 tonnes this year, due to Brazil’s new biodiesel blending regulations.

The executives added that Brazil’s biodiesel market, while growing, was still relatively small in terms of its methanol needs, compared with other methanol markets in the country.

They ruled out ethanol replacing methanol as a re-agent in biodiesel, citing cost and technical reasons.

It would take about double the volume of ethanol to fulfil the same function methanol has in biodiesel, they said, adding that this factor made the use of ethanol in biodiesel prohibitively expensive.

Prosint’s Fernandez pointed to a large Brazil ethanol producer who is also making biofuels. That producer, who Fernandez declined to identify, was a Prosint customer for methanol, he said.

“If ethanol was feasible in biodiesel, they [the customer] would be the first to use it,” he added.

Brazil, like the rest of South America was likely to continue following North American methanol pricing in setting its own price, the executives said.

While methanol demand kept growing, the market would be too small for the foreseeable future to justify separate South America pricing, they said.

Co-sponsored by Houston-based consultants Jim Jordan & Associates and the Washington, DC-based Methanol Institute (MI), the two-day 2007 Methanol Forum ends on Thursday.

By: Stefan Baumgarten
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