Study: Global methanol demand to rise by 80% in decade, led by China

Global methanol demand is set to rise significantly -- from 60.7 million tons in 2013 to more than 109 million tons in 2023 -- with an average annual growth rate of 6%, according to new IHS research released Friday.

China is expected to be the major driver of this demand increase, while at the same time, the North American methanol market -- riding the wave of low-cost US shale-derived feedstocks -- is undergoing a renaissance as new projects deliver significant capacity additions.

“The methanol market is in a period of rapid transition, especially the North American market, which is accelerating quickly, thanks in part, to inward Chinese investment that is taking advantage of the region’s low-cost shale gas resources to feed its derivative units” said Mike Nash, global director of syngas chemicals at IHS Chemical. 

“More than 50 million metric tons of global methanol capacity additions are expected between 2013 and 2023, with more than 17 [million tons] of that new capacity to be added in North America during the next decade,” he added. “This is more than six times today’s output, and heralds the return of the North American methanol industry as a production powerhouse.”

Methanol is often used in the chemical industry to make formaldehyde and acetic acid. Additionally, the new application of methanol-to-olefins (MTO), a development that has taken root in China, consumes merchant methanol and converts it into ethylene, propylene and other derivatives.

Methanol can also can be used in a variety of fuels, such as: direct blending into gasoline, biodiesel, as the gasoline oxygenate MTBE, as a substitute for propane, as ship bunker fuel or in fuel cells. Methanol demand into fuel applications represents a significant upside to methanol demand growth, according to IHS.

Nash said a “tidal wave of new US projects is being announced,” including “virtual integration” of methanol as a feedstock for derivative plants in China, and a restart or relocation of old plants, including two Methanex units, which are in the process of being completely disassembled, relocated from Chile to Louisiana, then reassembled and re-started.

According to IHS, China’s methanol consumption will more than double from 30 million tons in 2013 to 67.5 million tons in 2023. The country will address its accelerating demand growth mostly by the rapidly emerging methanol-to-olefins (MTO) technology. 

Yet, it is expected that domestic production will not be able to satisfy its growing local demand and, therefore, it will rely heavily on imports, IHS reports. To satisfy the country’s rapidly increasing appetite, China’s imports are projected to six-fold from more than 4 million tons in 2013 to almost 25 million tons by 2023.

“The growth of MTO plants that are not tied to coal production is booming on China’s East Coast, and we expect that this will have a major impact on the global methanol market, since the overall economics are advantaged,” said Nash. 

“For Chinese producers, the economics of creating olefins from methanol that has been derived from cheap coal and gas are better than creating olefins using the traditional, oil-based naphtha route, especially since the country’s coal industry is located in a remote, Western area. There they not only have a cost advantage, but they can also minimize the environmental impact that is a concern in the region.”

According to IHS experts, North America will become a net exporter of methanol in 2017. This will have a significant impact on global trade flows, which are likely to be followed by new pricing dynamics. Northeast Asia, Europe and North America were the world’s largest importing regions of methanol in 2013, representing more than 70% of total world import figures. 

Europe is expected to increase its import levels, whereas Northeast Asia imports are forecast to triple during the period 2013 to 2023.