Expansions in methanol production capacity have led to shifts in trade flows and have increased pressure on higher-cost producers, Methanex CEO John Floren said Thursday.
The startup of Methanex's 1 million mt/year Geismar II plant in Geismar, Louisiana, the first full quarter of production from the 1.3 million mt/year Celanese/Mitsui joint venture plant in Clear Lake, Texas, and strong coal-to-methanol production in China contributed to firm supply levels in the fourth quarter, Floren said in a conference call to discuss Q4 results.
Global methanol pricing has been under pressure from strong global supply levels, in addition to impacts from soft demand and a weaker energy sector.
The expanded US capacity has contributed to the supply situation as US production capacity has increased to 5.75 million mt/year from 2.25 million mt/year at the start of 2015.
The increased US capacity and plans for additional methanol projects have led the US market into a transition from a net importer to a net exporter, sources have said.
"Some competitors moving product into the US had some molecules displaced, leading to some messiness in the market," Floren said.
Material from Venezuela and Trinidad and Tobago that traditionally entered the US market has been forced into other markets, global sources have said.
The firm supply levels, falling global prices and increased capacity have led to increased speculation of producers needing to idle plants.
"We believe over time that high-cost production should rationalize," Floren said.
He expected some such units in China to have already done so, but added that they might be operating under cash costs as they await the four planned methanol-to-olefins unit startups this year.
The entry of Iranian methanol into the wider market will also impact global trade flows when sanctions are fully lifted.
"Starting in 2017 we might see more product flow to Europe and Korea fro Iran," Floren said.
He said he did not expect significant changes from the entry of Iranian methanol into those markets. He added that the material that ends up in Europe and Korea would reduce that amounts headed to China and India.
