Methanol expansions affect high-cost producers: Methanex CEO

Expansions in methanol production capacity have triggered shifts in trade flows and increased pressure on higher-cost producers, Methanex CEO John Floren said in statements carried by Platts.

Methanol prices have been weighed down by strong global supply and weaker demand, as well as low oil prices. The drop in prices fueled speculation about high-cost firms production stoppage. 

"We believe over time that high-cost production should rationalize," Floren said during a conference call to discuss 4Q results. "Some competitors moving product into the US had some molecules displaced, leading to some messiness in the market.”

Major Gulf-based companies that produce methanol include Saudi Basic Industries Corp (SABIC), Saudi International Petrochemical Co. (Sipchem), Methanol Chemicals Co. (Chemanol) and IQ, or Industries Qatar.

US production capacity has increased to 5.75 million tons/year from 2.25 million tons/year at the start of 2015. The U.S. has turned to a Methanol net exporter after being a net importer.

He noted that after lifting Western sanctions on Iran, more Iranian products should flow to Europe and Korea in 2017, but he ruled out a significant impact on the market as increasing exports to Europe and Korea would mean fewer exports to China and India.

Methanex’s Geismar II plant in Geismar, Louisiana, which produces 1 million tons/year, helped contribute to firm supply levels in the fourth quarter, he added, along with 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.