Methanol is one of the top five seaborne chemical commodities accounting for 35 percent of the world seaborne chemical and veg-oil trade in 2014. Despite being the largest producer, by both capacity and output, China remains a net importer and will continue to drive demand for methanol exports out of North America and the Middle East.
The build-up of petrochemical capacity in the first wave of U.S. projects, estimated at about 12 million tonnes per year, presents a long-term competitive challenge for Europe and the Middle East’s petrochemical industry. Prior to 2015, the U.S. imported approximately 5 million tonnes of methanol per year, mainly from Trinidad and Tobago and Venezuela. Given these new capacity additions the U.S. will become a net exporter of methanol in 2016.
In the Middle East, Iran is the only country to have new projects and expansions in the pipeline. If sanctions are lifted in 2016, Iran will increase its methanol production by 20 million tonnes between 2020 and 2025, with most of the incremental flows moving to Asian markets. The Middle East has absolute advantage in methanol production, but no new capacity will be added until Iran’s new projects start up.
The large volume of methanol supply will find new markets across the globe over the next five years. The addition America’s new production capacity has weighed heavily on methanol prices, leading to a significant fall in both spot and contract prices in 2015, according to Hu Qing, Drewry’s lead analyst for chemical shipping.
By 2020, North and South America will export more than 9 million tonnes of methanol to Northeast Asia, mainly China. Once North America starts exporting methanol to Asia, tankers with specialised coatings such as zinc or marineline, interline and stainless steel will benefit. On the trans-Pacific trade lane, MRs with zinc-coated tankers are competitive as the ship price and freight rates are lower, but with less flexibility compared to large stainless steel tankers.
“The average size of a methanol ship is expected to increase considering the long-haul distance between the major sources of supply and demand. Shipping cost will remain an integral part of the overall product price. The Middle East and U.S. will be key sources of supply for the product, with China and India being the ultimate destinations,” said Qing.
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