Analyst says only 60% of planned US methanol projects to be built

23 July 2013 18:16  [Source: ICIS news]

HOUSTON (ICIS)--A flurry of new US methanol plant announcements has prompted a Canadian stock analyst to predict that only 60% of the projects will get built, according to the analyst’s report issued on Tuesday.

Steve Hansen at Raymond James in Vancouver said six projects have a good chance of completion, among them the announcement by Valero made earlier this month.

The others, Hansen said, are likely to include two units Methanex is moving from Chile to Louisiana, LyondellBasell’s restart of an old plant and the Celanese/Mitsui project - both of those near Houston - and expansion of OCI’s plant in Beaumont, Texas.

Hansen’s report explains that some projects will fail because of cost inflation stemming from what he calls a massive wave of petrochemical investment in the US Gulf over the next decade.

Another obstacle likely to derail projects is failure to get long-term gas and methanol contracts necessary for financing. The cost of construction will also increase as the US becomes a net exporter of energy, the report said.

“Given this macro backdrop," Hansen said, “we currently believe that only six of the 10+ projects we are monitoring have a high probability of reaching production...”

If all six of the projects Hansen considers likely get up and running, they will produce annual methanol capacity of 6.56m tonnes/year, or slightly more than the 6.4m tonnes of US demand expected this year.

In 2012, the US imported 5.2m tonnes of methanol, with 85% coming from Trinidad, Venezuela and Equitorial Guinea, according to Hansen.

Hansen said there is a “high probability” that the US will become self-sufficient in methanol production by 2018.

($1 = €0.76)

By: Lane Kelley
+1 713 525 2653

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