FEATURE: Iran aims for global methanol markets with

planned 10 million mt production

July 02, 2014 05:04 AM GMT
SINGAPORE, 2014-07-02
Iran aims to penetrate global methanol markets with its planned production of 10 million mt/year of
methanol, sources close to the matter told TPS.
An Iranian producer told TPS that Iran will try to direct the supply of methanol to every market in the
world, although this would still depend on arbitrage opportunities once international sanctions are
further eased.
If it were in my hands, I would not direct this supply of methanol solely to China and India. I would
direct it to every single methanol market in the world, although this would depend on the market
opportunities which Iran has in the future, the producer said.
IRANS METHANOL PROJECTS
Local media had previously reported that the Middle Eastern country had seven methanol projects
coming up, much of it financed with Chinese capital, with construction of each project likely to kick
off every six months.
According to the local media reports, construction of the first project in Dayar City had already
started as long as eight months ago.
Name

Owner

7th
Methanol
8th
Methanol
9th
Methanol
10th
Methanol
11th
Methanol
12th
Methanol
13th
Methanol
14th
Methanol
15th
Methanol

Marjan
Petrochem
Sabalan
Petchem

Location

Capacity
(mt/yr)

Projected Production Progress (as of Mar

date
2014)

Pars

1.65 million

2016

21.5%

1.65 million

2016

17.2%

1.65 million

2016

17.2%

2.31 million

2015

64.1%

1.65 million

2016

9.3%

1.65 million

2016

9.1%

1.65 million

2016

NA

1.65 million

2016

11%

1.65 million

2017

19%

South
Pars
South
Dena Petchem
Pars
Kaveh Metanol Dayyaer
Veniran
Apadana
ME Kimiya
Pars
Di Polymer
Aryan
Arman
Methanol
Siraf Energy

Total Capacity

Pars
South
Pars
South
Pars
South
Pars
Dayer

15.51 million

Source: NPC Petrochemical projects 20th

Edition

WHERE WILL THE METHANOL BE HEADED?

China
Market participants said a significant portion of the planned 10 million mt/year of methanol could be
funnelled to the Chinese market because it is increasingly used as a petrochemical feedstock and
for gasoline blending. By end 2013, China domestic methanol production is around 60 million
mt/year but operation rate hovers at around 70% or less.
China imported 2 million mt of Iranian methanol in 2013, and the volume has been consistent since
2010.

A Saudi methanol producer was confident that China will receive most of the Iranian methanol
exports: China has always been one of the largest consumers of Iranian methanol so far, especially
if the MTO and MTP plants start up on time.
But we need to give it a bit more time to check on the progress of the lifting of sanctions before we
can gauge how the Iranian methanol will affect the methanol markets, he added.
Chinese traders told TPS that China would be able to absorb the extraneous Iranian methanol
cargoes as local demand is expected to increase with each coming year. Furthermore, not all of the
expected two million mt/year Iranian cargo will head to China.
China typically uses about three million mt of methanol a year. About 2 million mt is produced
domestically, China can import about one million mt annually, a Shanghai trader said.
Even if demand for methanol goes up to four million mt/year in five years times, China can still
import more than one million mt of Iranian methanol by then, another trader said.
Other traders said new uses for the methanol such as the upcoming Methanol-to-Olefin (MTO) and
Methanol-to-Propylene (MTP) plants would drink up the Iranian methanol.
The upcoming MTO plants can easily absorb one million mt of methanol a year by themselves, a
Chinese trader said.
China Petroleum and Chemical Industry Federation estimates the countrys methanol demand to be
46 million mt/year by 2015, rising to 70 million mt/year by 2020.
India
However, the excess supply of Iranian methanol is not likely to make a big impact in India, its second
largest importer.
Indian traders told TPS that local prices would not drop drastically as price movements had already
mellowed.

Methanol prices in India have already bottomed out so far. Right now, India is also short of
methanol, hence any Iranian imports would not make a difference, he said.
Another Indian trader said prices could move slowly downwards, mirroring present trends.
Prices are not even at $300/mt right now. The Iranian methanol supply could exert a slight
downward pressure on prices, although not by much, he said.
India mainly uses methanol for the production of formaldehyde, which is in turn used to make
wooden boards in the country.
PRICE DISPARITY
The current price difference between Iranian and non-Iranian prices is expected to normalise once
Iranian methanol exports hit the market. At present, Iran origin methanol is sold at a discount of $510/mt on a CFR China basis due to the sanctions.
There is no price disparity between Iran and non-Iran cargoes on CFR India basis as India qualifies
for Iran sanctions exception.
The disparity in Iranian and non-Iranian prices will go away once Iranian methanol exports hit the
market. Historically, this has been so. We may not see Iranian cargoes being offered at a discount
anymore, the Middle East producer said.
However, whether the Iranian exports will affect global methanol prices will depend on the demand
and supply situation further down the road.
Prices may move north, a Chinese trader said, instead of southwards as dictated by arbitrage
economics. Iran is also not expected to sell at too low a price.
Prices may actually increase if the demand for Iranian methanol goes up once the international
sanctions on Iran are completely lifted, he said. Iran usually sells at official listed prices and will not
offer cargoes at too much of a discount to global market prices once they are allowed to export
officially.
However, most market participants said prices would likely dip if Iranian methanol floods the market.
Price-wise, the Iranian methanol may have to compete with shale gas-based methanol from the US,
hence prices may dip, a Chinese trader said.
On-site methanol production capabilities that come with MTO and MTP plants could also depress
prices further by quite a large amount, a Chinese broker said.
-- Paul Lim, paul.lim@petchemstandard.com