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Methanol Whisper

Methanol Whisper
 

Research Question: Will the cost of Methanol production in China lead to a solid entry point for U.S. methanol producers in 2015?

Companies Covered: Methanex (MEOH), Celanese Corporation (CE), LyondellBasell (LYB)

Report Available: February 27, 2015

 

Blueshift’s initial research shows Chinese companies increasing its methanol supply to meet its growing demand, and due to government subsidies, may keep U.S. producers from fully participating in the burgeoning market.

 

Observations

  1. Methanol prices remained softthroughout Q4 2014, driven lower by falling crude prices. The increasing supply and slow inventory depletion also held prices down. China drives the global demand for methanol and currently consumes 51% of the world’s supply. Chinese methanol production and domestic consumption have grown 18% annually since 2008. Production reached 32 million tons in 2014, while China’s actual demand was 41.2 million tons, up 11.5% year-over-year.
  2. China’s demand for methanol shows no long-term sign of decelerating. The country consumes the fuel in vehicles and has plans to increase the number of methanol to olefins (MTO)plants from five to 18. Due to falling shale gas prices, China plans on building several methanol plants in the U.S. over the next five years. By 2017, North America will become a net exporter of methanol and account for 1/3 of the 50 million additional tons produced over the next decade. Most sources anticipate methanol’s long-term pricing to rise as China’s consumption will increase indefinitely.
  3. Methanol prices are consistently lower in Asia than the rest of the world. In November, methanol’s price per tonin the U.S. was $499, in Europe $501, and in Asia $435. A factor that lowers methanol price in China is government subsidies paid to Chinese coal, MTO, and methanol producers. In 2013, China announced a plan to reduce government subsidies to industry, but its 2014 economic slowdown curtailed some of the planned reductions. With methanol pricing artificially lowered, U.S. companies may struggle to profitably fulfill the increasing global methanol demand if China maintains its current subsidies and directly imports most, if not all, of the methanol it produces in the U.S.

 

To determine if Chinese government subsidies will prevent U.S. methanol suppliers from profitably participating in global methanol production, Blueshift will gather data and issue a market research report from independent sources in the following areas: Chinese methanol producers, Chinese methanol-to-olefins producers, U.S. methanol producers, U.S. methanol-to-olefins producers, and industry specialists.​

 

To see other ideas Blueshift Research is currently working on, please click here.