MMSA is an independent analysis provider for the global methanol industry. How is this industry faring in 2024?

In order to put what is happening in today’s markets into context, it helps to look back a few years, which have been loaded with external market influences. 2021 was a strong year for methanol demand despite COVID, as increased production in the olefins business for personal protective equipment and a still-strong China economy pulled methanol demand and reflected positively on prices. In 2022, we started seeing the combined impacts of the lockdown in China and the invasion of Ukraine, as high energy and coal prices eventually stunted methanol consumption in Europe and elevated costs of methanol production in China to unprecedented levels. 2022 marked the worst methanol margins on China coal production we have ever seen. Even though things improved in 2023, the war in Ukraine, a slowdown in US economic growth, and the real estate bubble burst in China continued to cast a shadow on the industry. Today, the methanol industry is hitting stride once again. Chinese demand is getting better. Consumers are returning to the methanol-to-olefins (MTO) space, which is the largest market for methanol globally; meanwhile, coal prices have eased, depressurizing both energy and feedstock prices. New methanol capacity in the US Gulf has been delayed, and a loss in production in Iran and Europe has helped tighten markets.

MMSA is also working with the low-carbon methanol sector. What have been the latest strides in this sector?

The low-carbon methanol space (or making methanol with a lower greenhouse gas emissions profile) has taken off in recent years. Large ship owners have ordered literally hundreds of dual-fuel vessels that can run on methanol. This is triggered by new regulations, especially coming from the EU, to decarbonize the shipping industry. It is still early days, and low carbon methanol remains more expensive than conventional (or fossil fuel) derived methanol, and MMSA has developed several analytical tools and is helping various players to figure out this space and how to best position it for the future.

Are the economics of green methanol as a bunker fuel improving?

The economics have only modestly improved. Only e-methanol, made from renewable hydrogen via hydrolysis, and methanol made from captured CO2, meet the FuelEU maritime regulation; both of these are very expensive. That leaves the low-carbon methanol in a place of uncertainty but with great promise. Meanwhile, more methanol-ready vessels are ordered, and Singapore is running a huge project to look at methanol as a marine bunker fuel. Regulators could also advance to allow lower-cost (but higher-carbon) versions of methanol. The outlook is generally positive on this front, with a lot more work to be done.  

In the current context, how competitive is methanol as a feedstock for olefins?

The MTO sector takes almost 20% of the olefins supply to China. It is a strategic industry for China and olefin producers from methanol are currently making small but positive cash margins. Globally, the olefin market has had a really tough time in the last year. Unlike naphtha-based olefin products, which depend on a refinery, MTO producers have much greater flexibility, able to buy methanol and manufacture polymers and olefin derivatives on-purpose, whenever needed. This gives the MTO “machine” a significant advantage. Right now, naphtha prices have lowered, which means we should see naphtha-based olefins producers doing a little bit better. Contract net transaction prices are in the US$300 range and could possibly go up to US$350 by the end of the year.

MMSA is turning 20 years since it was founded this April. Do you have a concluding message for our readers?

A big focus of our work for the past two years has been in the low-carbon methanol market, advising some of the world’s leading players in both the methanol and shipping industries, so we will keep supporting these markets. With more people diversifying away from China, investments are landing in low-cost and geographically favorable Southeast Asia, where we see a great opportunity for further growth. Twenty years from now it is highly possible that methanol will play a major role in the carbon efficiency in our planet.