INSIGHT: Asia’s methanol players ponder impact of Iranian megaplants

SINGAPORE (ICIS)–Three methanol large-scale plants in Iran are set to add up to 5.6m tonnes/year in nameplate capacity by 2020, potentially overwhelming Asia’s methanol markets.

China and India’s import needs will be of vital importance to Iran’s producers as they seek to place their material.

Iran methanol plants

Name	Capacity (tonnes/year)	Projected start-up
Marjan Petrochemicals	1,650,000	August 2018
Kaveh Petrochemicals	2,300,000	End-March/early-April 2019
Bushehr	1,650,000	H2 2019

Asia’s large importers of Iranian methanol, China and India, will be watching the plants’ start-up closely.

Buyers in other Asian countries were not able to accept Iranian material due to financial or logistic difficulties caused by US sanctions on Iran.

China and India imported approximately 2.4m and 1.2m tonnes of Iranian methanol in 2018, respectively. The amount is far from the 5.6m tonnes that could theoretically be produced by the three new plants in Iran.

To look at the possible outlets for these new Iranian volumes, China and India’s methanol consumption levels and demand patterns will be key.

China consumed approximately 65.4m tonnes of methanol in 2018, against India’s 2.1m tonnes. China’s consumption is expected to grow by 6% in 2019, to 69.4m tonnes, while India’s is expected to rise by 4% to 2.2m tonnes.

However, Iran’s methanol producers will need to watch closely the levels of imports into both countries. China imported 7.4m tonnes of methanol in 2018, or 11% of its methanol needs, while India imported 1.9m tonnes, around 90% of its methanol consumption.

It is therefore safe to say that the Indian market would not be capable absorbing much of the volumes that will eventually come from the new Iranian megaplants – all eyes will be on China and its capacity to absorb some of the material.

In addition, due to possible delays and technical issues common to any new plant start-up, it is unlikely that the three megaplants would all achieve stable commercial operations by the end of 2019 – methanol players coincide that 2020 is a more realistic target.

Whether that is the case, it would still take time for the Asian methanol market to feel the full brunt of the new Iranian capacities.

Even after all plants have achieved stable commercial operations in the longer term, the actual volumes being exported out from Iran would likely be less than the capacities would suggest, due to factors such as scheduled and unscheduled shutdowns, especially during the winter season when feedstock gas curtailment is common in the country.

Marjan Petrochemicals reached commercial operations in August 2018, and sold a number of spot volumes to both China and India. However, soon after the company’s methanol plant was shut down in December due to technical difficulties.

The producer has made multiple restart attempts, without being successful, and the current restart date is for early April.

Kaveh Petrochemicals issued a tender to India for 20,000 tonnes for March-loading material in mid-February, catching many by surprise because although its plant was mechanically complete in 2018, it faced issues in producing on-spec methanol consistently, with most market players not expecting any volumes this early on.

The tender was closed at the end of February on a FOB (free on board) basis and at a premium of 1%.

Kaveh issued a second tender to China for 30,000 tonnes for April-loading material on 4 March; the tender closed on 15 March but the winner has not been announced yet.

Kaveh’s plant has not achieved stable commercial operations yet, which are expected for the end of March or early April, according to a company source, who would not comment on the plant’s present operating status.

“[However] We are able to purify any raw methanol that we produced to be within specification before selling,” the company source said.

There had not been significant updates on the progress of Bushehr’s methanol plant, but some market players said they expected it to start up as early as mid-2019, slightly ahead of the date expected by most sources, around the end of this year.

China and India’s methanol markets have not shown any significant bearish reaction to the recent developments of these plants as well as Kaveh’s tenders.

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Chinese import prices have been trending upwards year to date, reaching a 2019-high on 8 March at $303/tonne CFR (cost and freight) China.

Prices fell later on in the month, closely tracking the domestic ex-tank market and China’s methanol futures markets.

India’s domestic and import prices have been more volatile year to date, but they have also trended upwards. Domestic ex-tank prices showed a general uptrend, hitting a peak of India rupee (Rs) 26.5/kg ($0.38/kg) ex-tank Kandla on 11 February, before gradually falling back afterwards.

Import prices rose to a peak of $312.50/tonne CFR WC (west coast) India on 15 February.

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Methanol is primarily used to produce formaldehyde, methyl tertiary butyl ether (MTBE) and acetic acid. Smaller amounts go into production of dimethyl terephthalate (DMT), methyl methacrylate (MMA), chloromethanes, methylamines, glycol methyl ethers, and fuels applications such dimethyl ether (DME), biodiesel and the direct blending into gasoline.

Pictured: Marjan Petrochemicals’ methanol plant in Bushehr, south Iran, during construction phase 
Source: Pasargad Energy Development

By Kite Chong

($1 = Rs68.99)