OUTLOOK '12: China to continue driving US methanol market

02 January 2012 22:00  [Source: ICIS news]

HOUSTON (ICIS)--The methanol outlook for the US and the rest of the world in 2012 and beyond will continue to be driven by China, market experts said at a recent conference.

That implies that it will point away from the US, where demand in the next five years should follow GDP levels at best and grow by around 2.5%/year, according to speakers at the World Methanol Conference in San Diego, California, in December.

The logic for modest growth in the US, presented by Dewey Johnson, senior director of IHS Chemicals, is that pricing will be offset by more plant capacity to be added in the US while the nation’s economy continues to struggle.

More capacity will also be added in China, Johnson said, but the methanol market there will continue to boom because of the country’s overall development rush and its use of methanol as a fuel additive.

So China continues to sit in the driver’s seat of the global methanol market, with about 40% of world demand, and is set to grab even more. On the bottom are the US and Europe, each muddling through with a recovering economy.

The rest of the world should provide better methanol growth than the US and Europe, but not quite as good as China's. Global demand until 2016 should grow by around 11%/year, Johnson said, while China’s growth rate is estimated at 17%/year.

However, one big unknown that concerns methanol sources is the future of formaldehyde.

The largest methanol derivative, formaldehyde, is used to make an adhesive agent in plywood and other construction materials and accounts for 32% of global methanol demand.

It has also been labelled a known carcinogen by a US regulator.

Industry observers targeted a report from the US Department of Health and Human Services (HHS) released in July that named formaldehyde as a known carcinogen.

Their consensus opinion, at least as voiced by speakers at the San Diego conference, was that the report was based on faulty data from studies involving rats.

“If you believe in the after-life, please don’t come back as a rat,” Dave Collins, a vice president at Momentive Specialty Chemicals, said.

In October, key members of Congress cited the formaldehyde study and other evidence in a letter to top White House science adviser John Holdren in which they accused the Obama administration of scientific misconduct.

Methanol sources said that the carcinogen label was not only wrong but also wrong-headed, because there was no alternative to formaldehyde-based adhesive agents in plywood.

Collins said that, if the label sticks, it could bring a major change in the manufacture of plywood and other construction materials.

“Then we’re going to have to think differently about how we build things,” he said.

For more on methanol and formaldehyde, visit ICIS chemical intelligence

By: Lane Kelley
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