Global methanol demand growth rate is expected to be lower than GDP growth rate

The growth rate of global methanol demand is expected to be lower than GDP growth for the first time. Mike Nash, vice president of IHS Markit, recently stated at the 38th World Methanol Conference that global methanol demand is expected to grow at an average annual rate of 2.8% in the next 10 years, lagging behind the 3.2% annual growth rate of world GDP .

The methanol market is at "a turning point." Nash said that the current and future forecast declines in crude oil prices mean that the fuel industry has reduced demand for methanol. At the same time, low oil prices are weakening the economics of methanol-to-olefin (MTO) production.

Nash said that in recent years, the growth of China's MTO capacity has kept methanol demand growth above GDP growth. In 2020, the MTO factory has been operating at high speed and the profit margin is also high, but "there is still a challenging period in the future."

IHS Markit data shows that from January to November 2020, the average utilization rate of MTO plants in China is about 80%, which is equivalent to about 1.25 million tons of methanol consumption per month. MTO's demand for methanol has always been healthy.

However, the sharp drop in crude oil prices at the beginning of the COVID-19 pandemic and the continued weakness in prices thereafter have weakened the relative profitability of MTO facilities. Nash said that in an environment where crude oil prices are low, the cost of MTO devices is relatively high. "MTO is at the top of the ethylene/propylene cost curve." Investments in steam crackers and propane dehydrogenation units around the world have led to a substantial increase in ethylene and propylene production capacity. In the next few years, the economics of MTO will face challenges.

IHS Markit predicts that the operating rate of MTO facilities will drop to slightly below 70% in 2022 and remain low for the next four years. Nash said: "We predict that between 2022-2026, MTO producers will face a difficult period." "This will have an impact on methanol demand."

Two new MTO plants in China are scheduled to start production in mid-2021, which will drive methanol demand. But after this, it is expected that there will be no new MTO factories for the time being. Nash said: "This means the end of China's first wave of MTO capacity expansion." This wave of investment decisions was made when the average crude oil price rose.

In addition, methanol demand growth in traditional consumption areas such as formaldehyde, acetic acid, dimethyl ether, and methyl tert-butyl ether has slowed down significantly, or even shrank. Under the background of low oil prices, the high hope methanol fuel consumption has stalled.