OCTOBER 2016 STRUCTURAL CHANGES IN THE WORLD OF METHANOL 34th IHS World Methanol Conference Olivier Maronneaud, Principal Analyst, global methanol/acetyls +44 20 8544 7970 Olivier.maronneaud@ihsmarkit.com 2016 IHS MARKIT. ALL RIGHTS RESERVED.
The Methanol Market in Figures 75 million tons Estimated global methanol production in 2016 80 vessels Equivalent volume shipped between Iran and China on an annual basis 33 percent Share of total methanol produced and being shipped from one country to another
Methanol Supply 2016 IHS MARKIT. ALL RIGHTS RESERVED.
Main Forces Driving the Methanol Industry Methanol is a true chemical commodity It is easy to ship to the main demand centers There is a strong focus on feedstock, both in terms of cost and accessibility Driven by these fundamentals, the methanol industry went through significant waves of changes over the past decades Closure in the US in the 2000 s and new builds in Trinidad New builds in Middle East New builds in China based on coal-chemical technology New wave of projects in the US on the back of shale gas
This Logic Prevails for New Developments Where have most recent projects been announced? In the US In Trinidad In Iran In Russia And in more hypothetical places such as Nigeria or Mozambique The analysis through an industry cost curve helps to understand the impact of new builds on methanol prices and trade flows
Methanol Capacity and Production in 2016 5.2 61.6 6.7 94% 10.9 65% 3.1 80% 3.3 56% 68% 16.2 82% 6.8 55% 2016 methanol capacity 80% 6.7 Regional capacity in million metric tons 2016 methanol production incl. operating rate
$/Metric Ton 34 th Annual World Methanol Conference/ Oct 2016 The Methanol Cost Curve Shows a Smooth and Steady Increase World 2016 Methanol Cost Curve: Cost Methanol Curve 550 Southeast Asia Middle East North America Northeast South America Asia 0 0 120 Cumulative Production - Million Metric Tons Source: IHS Markit 2016 IHS Markit
$/Metric Ton New Capacities and Minor Variations in Feedstock Costs Are Expected to Keep the Methanol Cost Curve Relatively Unchanged World Methanol Cost Cost Curve: Curve Methanol Evolution 2016-2021 550 34 th Annual World Methanol Conference/ Oct 2016 2016 2021 0 0 120 Cumulative Production - Million Metric Tons Source: IHS Markit 2016 IHS Markit
Expected Methanol Capacity and Production in 2021 34 th Annual World Methanol Conference/ Oct 2016 6.0 69.6 13.6 3.1 75% 89% 11.8 79% 74% 3.3 79% 20.1 81% 6.8 63% 2021 methanol capacity 79% 6.7 Regional capacity in million metric tons 2021 methanol production incl. operating rate
Methanol Demand 2016 IHS MARKIT. ALL RIGHTS RESERVED.
Methanol Has a Very Specific Demand Profile 2011 Global Methanol Demand by Derivative 2016 Global Methanol Demand by Derivative Fuel Derivatives 35 % Traditional Derivatives 65 % MTO/P 12 % Fuel Derivatives 33 % Traditional Derivatives 55 % Total Methanol Demand = 53 million metric tons Total Methanol Demand = 75 million metric tons Source: IHS Markit 2016 IHS Markit Source: IHS Markit 2016 IHS Markit
And Each Methanol Demand Segment Has its Own Specific Drivers Traditional Derivatives - Includes chemicals such as formaldehyde, acetic acid, MMA, methylamine and solvents - Mainly linked to domestic demand, population and GDP growth - Mature markets in most part of the world Fuel derivatives - Includes MTBE, biodiesel, DME and direct blending - China is the main consumption center - Growth is closely linked to energy prices - Potential new application is marine bunker fuel MTO/MTP - Only developed in China - The first wave of investment led to a first plant in 2011 and all units expected to be commissioned by 2017-3 rd largest derivative for methanol with 9 million tons consumed in 2016
As a Consequence, Methanol Demand Profile Differs Significantly from Region to Region 23% 25% 24% 76% 20% 75% 45% 77% 35% 39% 54% 46% 61% 18% Traditional Derivatives Fuel Derivatives MTO/MTP 82%
Methanol Trade: The New Trend Has Emerged 2016 IHS MARKIT. ALL RIGHTS RESERVED.
Thousand Metric Tons Share of Total Exports 34 th Annual World Methanol Conference/ Oct 2016 New Capacities in the US Have Impacted Trade Flows in the Americas US Methanol Quarterly Export 450 South America Methanol Quarterly Export 100% 2000 300 150 80% 60% 40% 20% 1600 1200 800 400 Thousand Metric Tons 0 1Q 14 3Q 14 1Q 15 3Q 15 1Q 16 North America South America West Europe Northeast Asia Other Source: IHS Markit 2016 IHS Markit US producers have been forced to look for export opportunities with a focus on Europe and Northeast Asia 0% 0 1Q 14 3Q 14 1Q 15 3Q 15 1Q 16 North America South America West Europe Northeast Asia Southeast Asia Other Total Exports Source: IHS Markit 2016 IHS Markit Supply from traditional suppliers has been rerouted, mainly to Northeast Asia
Thousand Metric Tons Million Metric Tons Operating Rate, % 34 th Annual World Methanol Conference/ Oct 2016 On the Other Hand, China Is Becoming an Ever Bigger Importer China Methanol Quarterly Imports 2700 1800 Northeast Asia Asia Methanol Quarterly Quarterly Supply/Demand Supply/Demand 20 16 12 Forecast 90 80 70 900 8 4 60 50 0 1Q 14 3Q 14 1Q 15 3Q 15 1Q 16 Iran Saudi Arabia Qatar Oman New Zealand Malaysia United States Trinidad Venezuela Other Source: IHS Markit 2016 IHS Markit Imports into China reached an all-time record level in 2Q, well beyond the growth in domestic demand 0 Q1-15 Q3-15 Q1-16 Q3-16 Q1-17 Q3-17 Available Capacity Nameplate Operating rate Source: IHS Markit 40 Total Demand Effective Operating Rate 2016 IHS Markit Healthy supply and increasing feedstock prices has kept China operating rates stable
Dollars per Barrel World Methanol Prices 34 th Annual World Methanol Conference/ Oct 2016 Regional Methanol Prices Have Reacted to Structural Changes in the Industry 550 Forecast 450 350 250 150 Source: IHS Markit 10 11 12 13 14 15 16 17 18 19 20 US Spot, Gulf Coast Rotterdam Spot, T2 China Spot, CFR 2016 IHS Markit
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