It also has many general solvent and antifreeze uses.
The European market began 2014 balanced to tight. Although European demand growth rates have not been particularly high of late, being more or less in with GDP growth, demand has been nevertheless strong.
Europe is a net import market for methanol, importing more than half of its supply, and must compete with Asia Pacific markets, in particular the voracious Chinese market, for Middle Eastern product.
Yet from around mid-February, Asia Pacific prices collapsed, a result of both poor demand in China, not limited to methanol, and an unprecedented lack of production problems. The latter of these factor particularly affected Southeast Asia, where a number of large plants had previously suffered from prolonged operational problems to the extent that the market had more or less accounted for them not contributing to the supply pool. When these plants produced at good rates for a sustained period, Asia supplies became very long.
Soon a rare arbitrage had opened up to Europe and the US, and shipments were being booked directly from southeast Asia to northwest Europe, flooding the European market. This persisted until the end of the second quarter, by when the arbitrage had closed and imports direct from Asia Pacific had ceased.
Although the market remained well stocked, a new round of production problems, including in Egypt and Libya, which serve Europe exclusively, had begun to limit resupply.
European methanol spot prices began 2014 at six-year highs, the culmination of a general upward trend that had been in place since 2009.
Yet the collapse of the Asia Pacific markets and the subsequent flooding of Europe led to European prices crashing. Spot prices fell by €133/tonne between late-February and early-June, the greatest sustained drop since late 2008.
The European Q2 contract followed suit, dropping by €90/tonne to €322/tonne, the largest decrease since the first quarter of 2009.
There is a sense that residual length will prevent prices from rising for much of the third quarter, but production problems and plant turnarounds will gradually absorb this length, and the usually robust fourth quarter could see prices rise again.
Most production is based on natural gas, naphtha or refinery light gas (excluding China, where coal is the primary feedstock). The two main processes are from synthesis gas (syngas) in a reformer and from methane by steam and catalytic autothermal reforming.
Plants of 5,000-10,000 tonnes/day based on cheap gas are being developed to produce low-cost methanol for fuel uses and light olefins production. Such developments tend to be restricted to Asia, however, while Europe remains focused on traditional applications.
Netherlands-based producer BioMCN has developed a process for making biomethanol from glycerin, which is a by-product in the production of biodiesel.
Demand growth in Europe remains tied to GDP levels and so has very limited prospects in the short term.
Globally, growth prospects remain restricted to increasing demand in Asia, and particularly in China. The recent shale gas boom in the US has resulted in a slew of new plants being built, old ones being restarted and some even relocated from outside of the US.