How is the rise in crude oil and natural gas impacting the price of methanol markets?

The price of oil is less directly linked to methanol markets than is the price of coal. The majority of methanol is made from natural gas as a feedstock, but crucial marginal supply comes from Chinese coal producers. Without these producers, there would simply not be enough methanol to satisfy global demand. Because coal makes the difference between sufficient and insufficient supply, the price of methanol is more sensitive to fluctuations in the coal price than it is to oil. With China wanting to reach peak GHG emissions in 2030 before arriving at carbon neutrality by 2060, coal production has become more regulated. China’s transition away from coal has kept supply in check and held prices high. When energy prices go up like they have done lately, the price of coal is once again not pressurized to come down. Indeed, the rise in energy prices has made olefin prices rise, which makes methanol a very competitive olefins feedstock. In short, methanol seems to survive regardless of the noise that happens on the outside.

With China reducing coal production in line with its carbon pledge, and methanol demand continuing to grow, where will methanol come from in the future?

No doubt people will need more products made with methanol in the coming decades, and the question that emerges is not only where will methanol come from, but also what will be the carbon intensity of methanol supply? We see an overarching commitment to invest in means to lower the carbon intensity of the methanol chain, be it by revamping existing operations or building new facilities with low CO2 emissions, but the good news is that the industry is adaptive and the technologies are already available, with many pilot plants around the world. At a small scale, there are novel routes whereby methanol can be made from renewable power with very low or even zero GHG intensity, for instance. These projects will set the stage for continued, probably decades-worth process advancements to provide methanol in the long run. The real question boils down to cost, because the cost of doing business will go up and it will impact the price of methanol too.

Could you explain some of the areas of research around low carbon methanol pathways? How are investors reacting?

First, there is no single solution or a one-size-fits-all. In an industrial area with access to CO2 emissions, CO2 that would otherwise be vented into the atmosphere can be absorbed and incorporated into the manufacturing product. Low-capital projects that use spare resources – like municipal or animal waste – can also capture small pockets of bio-methane to run a fuel cell and create energy. In this way, methane, a GHG that is 40-100 times more threatening than CO2, can be used to make methanol and methanol derivatives, even if at a small scale. At the other end of the spectrum, large-scale projects look at retrofitting coal-based methanol plants to reduce carbon. What matters across these different initiatives is the cost curve coming down as the process is improved and scaled up, and this is what investors most search for. Investment leads the LCM market, and the funding of new methanol plants is contingent on provable CO2 measures. Meanwhile, regulatory penalties are becoming stiffer, especially for marine fuels, and this will also get people investing.

Could you share a final message with our international audience and explain how MMSA could add value to the chemicals value chain?

To us, the most important aspect is to continue listening to our customers and grow with their needs. Out of listening to them, we came up with additional services like the low carbon transition study, as well as improved tools like our daily global tracking of methanol ships. As a specialist in advisory and analysis services, we will continue to provide our best objective opinion on both upstream and downstream methanol markets, connect people across the world, and provide opportunities to network. In November 2022, MMSA will again host the International Methanol Conference in Singapore, a platform for both producing and consuming methanol markets.