Viewpoint: Consolidation looms in US methanol

Spanish Market: Biofuels, Petrochemicals
27/12/24

The sale of Netherlands-based OCI's methanol production assets to rival producer Methanex is set to shift the market, with US methanol production most affected by the move.

Methanex in the third quarter of 2024 announced the $2bn acquisition, which is expected to close in the first half of 2025. The boards of directors of both companies and OCI's shareholders approved the transaction, but it is subject to regulatory approvals.

OCI operates the 1mn t/yr OCI Beaumont plant and is a 50:50 partner in Natgasoline, a 1.7mn t/yr joint-venture plant between OCI and Proman.

Methanex operates three plants in the US, all in Geismar, Louisiana. These plants carry a collective 4mn t/yr capacity and represent one-third of total US methanol capacity.

At front and center of the acquisition is the Natgasoline plant in Beaumont. Natgasoline, when operational, represents 14pc of domestic production. The plant opened in 2018, and throughout those six years, the plant has seen its share of operational issues. The most recent was a fire at the reformer unit in early October, resulting in a complete shutdown lasting nearly three months.

When the deal was announced, Methanex made it clear that the transaction was subject to approvals by OCI shareholders, as well as a pending legal decisionbetween OCI and Proman.

"If it is not settled within a certain period, Methanex has the option to carve out the purchase of the Natgasoline joint venture and close only on the remainder of the transaction," the company said in September.

Methanex and OCI declined to give further details, as the deal is still pending. Proman did not respond to a request for comment.

If it goes through, the acquisition would result in the exodus of OCI from the US methanol market. But the issue of liquidity in the US spot barge market is also looming. Market participants said OCI is a frequent buyer when the Natgasoline plant goes down. In October, when Natgasoline was completely shut down, 340,000 bl of methanol moved for delivery at ITC, the terminal on the Houston Ship Channel where methanol is exchanged, according to Argus data.

Market participants expect liquidity to be about the same until some time after the deal closes. When a plant goes down, a producer will emerge in the spot market for purchases.

In the longer term, there are some questions around international distribution and where US methanol exports find a home. Methanex is a major exporter to Asia, whereas OCI sells into the European market.

The low-carbon methanol sector will also experience some shakeup. OCI is a major participant in the bio-methanol space, selling volume into Europe. Methanex produces carbon-captured methanol, also known as blue methanol, which has not penetrated the EU market.

By Steven McGinn

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