US methanol has hit bottom, rebound imminent – US executive

Bobbie Clark

26-Feb-2015

HOUSTON (ICIS)–US methanol prices may soon rebound even though crude oil prices remain depressed, the chief executive of G2X Energy said on Thursday.

Methanol prices have historically tracked crude oil, mainly as a result of its energy and fuel applications.

However, the rise of China’s coal-based methanol production has dramatically changed global market dynamics, said Tim Vail, the CEO of G2X Energy.

Vail made his remarks during a presentation at the Monetizing C1 Methane Feedstocks conference in Houston. The event was organised by American Business Conferences.

“What happens is when you get down to the [crude oil prices] we have today, Chinese coal-based methanol production begins to shut down,” Vail said. “They cannot operate profitably much below where we are now.”

US crude oil futures have declined from over $100/bbl in mid-2014 to below $50/bbl currently.

Methanol prices have also fallen, from a 2014 high of 167 cents/gal to about 105 cents/gal for most of this month.

Vail said he believes methanol prices have now hit their bottom.

“We’ve seen [methanol prices] drop precipitously over the past year, and they’ve now flattened out,” he said. “Talking to some of the folks in the industry, it’s now bumping along the floor…and we don’t anticipate it going much lower.”

He said he believes a rebound is imminent.  

“How quickly it recovers, nobody knows,” Vail said. “Global methanol demand increases with GDP. That means you need to build a world-scale plant…every year to keep up with that demand, and we’re not seeing that. So prices are bound to recover, particularly as economies in the world improve.”

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