OUTLOOK '18: OCI plant start-up to be record-breaking for US methanol

Source: ICIS News

2018/01/08

HOUSTON (ICIS)--The big event for US methanol in 2018 will be the projected start-up of the new OCI Natgasoline unit in Beaumont, Texas, which should become a record-breaking plant for at least two reasons.

Photo by VISUM/REX/Shutterstock

First, the 1.8m tonne/year unit will be the largest in the US when it opens, though the start-up date is unclear at this point, and the world’s-largest designation most likely will be just a temporary title.

A year ago, in early 2017, OCI told analysts that its new plant would begin production in the second half of 2017. But that was before Hurricane Harvey, which struck the Texas coast in late August and caused historic flooding in Houston and Beaumont.

So OCI moved the start-up back to an indefinite point in 2018.

Ahmed El-Hoshy, OCI’s CEO, said in November that he anticipated the start-up of Natgasoline would be in the new year “and not just at the beginning of 2018”.

That set industry sources to speculating on whether the plant’s realistic start-up would be in the second quarter or the second half of 2018.

A veteran methanol watcher said the best bet at this point is that it will start cranking out methanol around mid-year because of what OCI was not saying publicly about the new plant.

“It was somewhat convenient that Harvey came along when it did,” that source said, “because they had some significant design issues.”

Whenever Natgasoline starts up, it will become the largest US methanol plant, though it may not hold the title for long.

Construction began in 2017 for a contender for the title, Yuhuang Chemical’s 1.8m tonne/year unit in St James parish, Louisiana.

Yuhuang (YCI) has targeted production to start in the fourth quarter of 2019, so the smart money bet is that start-up will be no earlier than 2020.

Most of the methanol from that unit is targeted at this point for the US, with the rest for export to Europe and China.

The current largest methanol plant in the US is the Celanese/Mitsui joint venture in Clear Lake, Texas, between Houston and Galveston, with capacity of 1.3m tonnes/year.

The new OCI and YCI units will bring total US capacity to about 9.5m tonnes/year.

US capacity was just short of 2.5m tonnes/year in early 2015. By the end of that year, it had grown to 6m tonnes/year.

Which brings up the second reason why the Natgasoline plant will be a record-breaking plant, because it will shift the US from being a net importer of methanol to a net exporter.

Current US methanol imports are a little more than twice as large as exports. Imports in the first ten months of 2017 (October data being the latest month available from the US International Trade Commission) totalled 2.8bn litres, while exports came in at 1.2bn litres.

But start-up of the Natgasoline plant should tip the scale and put US production in the surplus column.

Converting litres to tonnes, the difference between US imports and exports is roughly 1.27m tonnes, according to the latest data, so anything over that figure would shift the scale to net export. The Natgasoline plant’s capacity could bring 500,000 tonnes over that figure.

Industry analysts expect new capacity to bring prices down. In 2015, US methanol capacity more than doubled and sent prices to historic lows. Only when trade flows normalised and supplies got short in other regions did US prices recover.

Another methanol CEO, John Floren at Methanex, recently touched on that phenomenon in a conference call.

“Our view is, it's going to be a pretty good pricing environment until the next new production comes on stream,” Floren said. “And we're not expecting any new production till late first quarter next year (2018) at the earliest.”