Chemical profile: US methanol

02 May 2014 10:06 Source:ICIS Chemical Business

USES
Methanol is one of the top five chemical commodities shipped around the world and is used mainly to make three derivatives: formaldehyde, methyl tertiary butyl ether (MTBE) and acetic acid.

Methanol is also used to produce adhesives for the lumber industry, such as plywood, particle board and laminates, for resins to treat paper and plastic products, and also in paint and varnish removers, solvents for the textile industry and polyester fibres for clothing and carpeting.

Outside of the US, methanol is used as a direct fuel for automobile engines, as a fuel blended with gasoline and as an octane booster in reformulated gasoline.

 
SUPPLY/DEMAND
Plant restarts in the US and new methanol plant announcements intended to cash in on low US natural gas prices from shale plays have made what used to be considered a pipe-dream now a reasonable assumption – that the rebirth of the US methanol industry in just a few years could make it no longer necessary to import methanol from Caribbean, South American and African countries.

Two plant restarts in Texas led the way – OCI’s July 2012 restart of a plant in Beaumont (soon to be expanded), and LyondellBasell’s restart of a mothballed unit at Channelview near Houston.

Those units, when added to existing facilities, put US methanol capacity at just over 2m tonnes/year, which covers about a third of US methanol demand of 6-6.5m tonnes/year.

Then there are what appear to be the best bets among announced projects – Methanex’s move of an idled plant from Chile to Geismar, Lousiana is set to begin operating later this year or in early 2015, and the producer has announced plans to move a second plant from Chile to the same site. The Methanex units would total close to 2m tonnes/year of capacity. Methanex has even floated the possibility of moving a third unit from the South American country to the same location.

Even if Methanex only moves one unit from Chile, there are other announced projects that would keep the boom going. Celanese’s joint venture with Mitsui at Clear Lake, and OCI’s new greenfield project in Beaumont – both in Texas – would provide a combined 3m tonnes/year in new US capacity if built.

There have been so many project announcements that it seems a reasonable assumption that not all will be built. Methanex’s top executive has said the cost of building new greenfield plants – well over $1bn for a 1m-tonne/year unit – will probably derail many projects.

As an example, Valero’s plan to build a large methanol plant in Louisiana at its refinery near New Orleans has been delayed for at least two years because of cost projections.

Methanex’s first unit in Louisiana is expected to begin operating later this year. Celanese recently said it is considering building another methanol plant – a 1.3m tonne/year plant at the company’s Bishop site near Kingsville in south Texas.

Earlier this year Celanese received a permit to start construction of a methanol plant at its huge acetyls complex in Clear Lake, near Houston.

PRICES
US methanol demand began the year with one of the harshest winters on record providing a sales boost for antifreeze and windshield washer fluid, pushing spot and contract prices up to a new five-year high.

Then the weather moderated and news of methanol from southeast Asia arriving in the US during April and May pulled down soaring prices.

US April contracts dropped about 6% from March postings, largely because of half a dozen shipments from Indonesia and Malaysia that caused traders to bring down spot prices by nearly 20 cents/gal in less than two weeks.

TECHNOLOGY
The majority of methanol produced today comes from natural gas, naphtha or refinery light gas used in large-scale, low-pressure processes. This has replaced the older, less efficient method of distilling wood for wood alcohol that was then converted to methanol.

In a typical methanol unit, natural gas and water are converted to synthesis gas (“syngas”) which consists of carbon monoxide, carbon dioxide and hydrogen. The syngas is then converted into methanol in a high-pressure process using a catalyst made of copper, zinc and aluminum.

OUTLOOK
Prices dropped about 10% in early 2014 and should trend lower as new US production comes on line, even if just a fraction of the new facilities are built. Some industry observers – especially buyers and traders – expect prices to move significantly lower as new capacity comes on line.

But producers see new production in the US being offset by better than low single-digit demand growth because of the ongoing build-out in China and also because of its experimentation with methanol as a fuel additive.

By Lane Kelley