Published November 1994
Methanol prices have recently surged to record levels, which has generated interest in expanding methanol capacity. An assessment of the outlook for methanol pricing and profitability over the medium term is therefore timely. For this assessment we have used data from SRI multiclient programs and databases, and applied the approach developed in Process Economics Program PEP Report 205: Petrochemical Industry Profitability, to make scenario-based projections for methanol. We note that according to our correlations, the price projections are very sensitive to the projected supply/demand balance, which cannot currently be projected with a high degree of confidence. Nonetheless, an examination of the historical trends and tenable forward scenarios provides an improved perspective on the outlook for methanol profitability.
We examine three scenarios. Our base case has the following key elements. On the demand side we estimate the methanol needed to meet the most likely MTBE and TAME requirements for oxygenated gasoline, while assuming that "chemical" demand for methanol grows at a steady rate. On the supply side we estimate a "maximum possible" capacity, and from that eliminate capacity with only low likelihood of implementation in the medium-term (approximately 25% of the total to 2001). We also lag start-up dates on the basis of our judgment. For a "low" case for pricing and profitability we keep the same demand schedule as in the base case, but assume that all of the possible capacity is installed by 2001. For a "high" or "cycle" case for pricing and profitability, we keep the same supply schedule as in the low case scenario, but assume that an upswing in the cycle for petrochemicals starts in 1995, and is comparable to, but somewhat lower than, that seen in the late 1980s.