New US methanol capacity to impact Middle East shipping
New capacity being added in US and Middle East methanol production over the next two years will have significant implications for chemical shipping trade flow patterns, according to the latest edition of the Chemical Forecaster, published by global shipping consultancy Drewry.
Methanol is one of the top five chemical commodities shipped by sea, accounting for 35% of world seaborne chemical and vegoil trade in 2014. China remains a net importer and will continue to drive demand for methanol exports out of North America and the Middle East, says Drewry, despite being the largest producer, by both capacity and output.
The Middle East is facing a long-term competitive challenge from the United States as its builds-up petrochemical capacity in the first wave of projects, estimated at about 12 million tonnes per year. These capacity additions will make the US a net exporter of methanol in 2016.
Methanol production in the Middle East, meanwhile (with the exception of Iran) has stagnated. Iran is the only country to have new projects and expansions in the pipeline and if sanctions are lifted in 2016, Iran will increase its methanol production by 20 million tonnes between 2020 and 2025.
“The addition in America’s new production capacity has weighed heavily on methanol prices, leading to a significant fall in both spot and contract prices in 2015,” said 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, and 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 Transpacific 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 US will be key sources of supply for the product, with China and India being the ultimate destinations,” added Qing.