- 2025年1月27日
- Market: Chemicals, Methanol
Methanol Market Puts-and-Takes Episode 6
In this episode, Argus senior analyst Cassidy Staggers talks with Greg Dolan, CEO of the Methanol Institute about:
- Global sustainability and decarbonization efforts and how methanol can play a pivotal role.
- What we can expect with pending IMO regulations and other policy measures.
- Whether Methanol will be eligible for IRA incentives and what is to come from the new Trump Administration.
Argus offers methanol prices, news, analysis, forecasts, and consulting.
Listen now
Transcript
Welcome to this edition of the "Methanol Puts-and-Takes" podcast series, a production of Argus Media, a leading independent provider of pricing and commodity market information.
Cassidy: I'm excited to have a special guest with me today, Greg Dolan, CEO of the Methanol Institute. Greg, can we start with you giving an introduction to yourself and the Methanol Institute?
Greg: Thanks, Cassidy, and I appreciate the opportunity to have this discussion today. I'm Greg Dolan, CEO of the Methanol Institute. I'm based in our offices in Washington, D.C. I've been with MI for 28 years, 14 now as the CEO of the association.
The Methanol Institute serves as the trade association for the global methanol industry with offices in Washington, Singapore, Brussels, Beijing, and Delhi. We have over 100 member companies representing the world's leading methanol producers, distributors, technology providers, and shipping companies. In fact, we've actually doubled our membership in about the last three years, and that's been driven by two sectors.
We now represent the world's largest vessel owners as methanol is becoming an increasingly interesting marine fuel, and then we also have a number of companies that are renewable methanol developers looking at biomethanol and e-methanol projects around the world.
Cassidy: That gives great insight into your members and kind of where you're leaning going into 2025. So let's dive right in. What are you seeing in the market that's exciting or particularly of interest to everybody involved?
Greg: Having been with the industry for a number of years now, I've kind of seen the industry go from lows to highs, and I can say that there's really never been a more interesting time to be in the methanol industry. I can look at it from two vantage points, the supply side, and the demand side. On the supply side, we see continued expansion of conventional methanol produced from natural gas with production starting last year from the Methanex Geismar 3 project in Louisiana. We saw the startup of the Sarawak plant in Malaysia.
Low carbon or blue methanol using natural gas as a feedstock with carbon capture and utilization is looking to transform a number of existing world-scale methanol plants to reduce the carbon footprint, and that's being led by companies like Mitsui, Celanese, and SABIC. And then, we can talk about renewable or green methanol.
Today, global methanol demand, according to Argus, is about 93 million metric tons or 31 billion gallons. In fact, you can check out our website at methanol.org to see the latest supply-demand data from Argus. Last year, renewable methanol made up only about 400 to 500 tons of that supply, but now we're tracking 200 announced biomethanol and e-methanol plants globally with total projected production capacity of 33 million tons or 11 billion gallons by 2030.
Now, not all those projects will move forward, but even if we saw 25% to 50% of that pipeline come to fruition, that's a lot of renewable methanol supply coming into the market. On the demand side, again, from some of the Argus data and supply-demand, roughly half of methanol is used for chemical markets, so it's a feedstock for paints, plastics, solvents, resins, hundreds of products that touch our daily lives.
We see about 35% of the demand is the direct use of methanol as a fuel in cars, trucks, buses, ships, industrial boilers, cook stoves, as a hydrogen carrier for fuel cell technology, also derivative fuels like MTBE, biodiesel, and DME. And finally, about 14% of the market for methanol is methanol to olefins, which is really right now a China activity with olefins being the backbone of the plastics industry.
Over the last three years, the use of methanol as marine fuel has garnered international headlines and billions of dollars of investments. We now have 50 vessels on the water running on methanol fuels, with a total order book for new builds nearly 350 vessels. We've seen the first of several of what will be 50 retrofit vessels being put into service, and there's probably another 200-plus methanol-ready vessels on order.
Certainly, the Maersk container ships, if everybody's seen them around the world, but it's not just the ocean-going container ships but also chemical tankers, dry bulkers, RoRos, Pure Car Carriers, very large crude carriers, cruise ships. Methanol is going to be really interesting for the cruise industry.
In addition, we have a wide range of short-sea shipping vessels, inland waterways. We can look at ferries, super yachts, pilot boats, tugboats, crew transfer vessels, heavy lift ships. So, if we look at the vessels that are on the water now and on the way, we can easily see 10 to 12 million tons of methanol demand, with most of those vessels launching between now and 2030. So we're going to need a lot of methanol supply.
Cassidy: That’s a lot to consider, just the different options and different pathways. It'll be interesting to see how companies and sectors really start to strategize the use of low-carbon methanol, renewable methanol, as it applies to their sectors. So going off that, diving in a little bit more, 2024 was a big year for sustainability and decarbonization efforts in the maritime industry. And you've talked about all the new builds of the ships and the retrofits and, you know, the interest from Maersk and other ship owners. These are going to really start to come into play into 2025.
So what do you think is kind of on the horizon this year as these efforts start to roll out, as, you know, kind of the waiting period is over, this is what's going to happen, it'll happen finally this year, we've been waiting for it? What is that going to look like exactly, do you think?
Greg: Definitely 2024 was a big year looking at sustainability and decarbonization in shipping. Last year, the Methanol Institute was granted consultative status at the International Maritime Organization, meaning that our industry has its own delegation at all these IMO meetings. Last October, the IMO's Marine Environment Protection Committee saw some significant progress in negotiations aimed at achieving the shipping's goal of being net zero greenhouse gas emissions by 2050.
At the MEPC, member states and international organizations focused on eight potential technical measures, looking at the establishing of greenhouse gas accounting certification technologies, and they also focused on economic measures, which would be the establishment of an IMO fund expected to be based on carbon levies on diesel bunker fuels.
Coming up this year, in April, we're looking at the MEPC 83, where we expect to see approval of a final set of amendments ahead of formal adoption at MEPC 84 in October. So if we can get to final adoption, that means that we're setting the stage for implementation of these IMO regulations by the middle of 2027.
Our focus at the Methanol Institute is not only do we have a seat at the table, but for these technical and economic measures, we want to make sure that the growing use of methanol as marine fuel is fully accounted for. So when we look at GHG accounting methodologies, we need to recognize the contributions of low-carbon methanol, blue methanol, as well as biomethanol and e-methanol. We need provisions that support mechanisms around well-to-wake emissions, mass balancing, book and claim, use of both default valid factors for emissions, as well as measuring certified actual emissions.
So there's a lot that needs to take place at the IMO. It's also a very compressed schedule because all this needs to get done really leading up to the critical meeting in April. And it's a lot to ask for. And we also may have a little bit of a monkey wrench in some of these proceedings, given the incoming Trump administration and a very different approach from the U.S. member state at the IMO.
Cassidy: IMO is very, very busy. I'm sure, they have the tons of groups and delegates around the world really trying to make this happen, which is really exciting. So when you think about IMO and kind of what they're working towards, how do you see that working alongside or in addition to, like, FuelEU Maritime, or EU ETS? Right? IMO has the global structure. So what do you anticipate that relationship being like?
Greg: We just participated in a submission of a paper to the IMO looking at emissions certification with the World Shipping Council and other partners and member states. And, the IMO doesn't really need to develop its own unique certification scheme. There are certification schemes and systems out there that work today and that should be addressed and recognized by the IMO when it's looking at emission certification for marine fuels.
One example is the ISCC. A lot of our members use ISCC for certification for biomethanol production. They could have ISCC PLUS certification for reducing the carbon intensity for voluntary markets, ISCC EU, which is based largely on regulated markets, the use of methanol as a fuel, particularly fuels going into Europe and qualifying under the Renewable Energy Directive, and there's a new certification for ISCC CFC or Carbon Footprint Certification. And that's going to be important for the low-carbon or blue methanol where, again, you're taking a conventional natural gas-based feedstock plant and capturing the carbon.
Right now, the European Union is the only market that is regulating carbon from shipping. And it comes now, as of this year, in two regulations. There's the Emission Trading System, the ETS, and the FuelEU Maritime. And in both cases, we're going to start seeing compliance penalties placed on shippers that continue to use polluting diesel bunker fuels. What that means is this year, the cost to use this area of very low sulfur fuel oil under ETS and FuelEU Maritime for ships going into the European ports could see the price of that product go up by €200 a metric ton.
Under FuelEU Maritime, every five years, they ratchet down the allowable GHG emissions, and it gets much more stringent, and the cost of compliance gets more high. So those penalties, by 2050, go up to something like €2,200 per metric ton.
What that means for methanol is that if you have a low-carbon or renewable methanol, as long as you're under the cost of compliance, underneath that penalties that are being assessed on diesel bunker fuel, you have a value proposition. So for biomethanol, when you start looking at these mechanisms coming into place in Europe, we can see biomethanol valued at €1,200 per metric ton. We could see a value for e-methanol at €2,200 a metric ton.
The blended fuels, take gray methanol or blue methanol, combine it with a little bit of green or blue or e-methanol or biomethanol, you can get to whatever carbon intensity target you want. So there's going to be a significant value to those fuels. And since that, European market taxing or regulations on shipping are the only one in place right now, that's kind of the only model that the IMO has to base its measures on.
We definitely see at the IMO level for international shipping, there's going to be a cost of compliance to continue to use diesel bunker fuel, which means that there's an economic value to using methanol as an alternative fuel.
Cassidy: It'll be interesting to see, as you mentioned, just the measures and the goals just become more strict as we go closer into 2030 and into 2035. So we'll continue to really see this space evolve, and how IMO fits into that will be interesting. I guess we have something else to look forward to in mid-2027, hopefully when that happens.
Talking a little bit more North American-centric, U.S.-centric, if you will, you mentioned the Trump administration. They just entered the White House on Monday, the 20th of January. And the IRA credits, some of the frameworks or the specifics had been mentioned prior to Biden leaving office.
So where are we sitting at with these? What's the hope for methanol? What's the hope for gray or blue? What do you see that playing out for the U.S. specifically as they're kind of the more incentive-based than the penalized-based like the European policy is?
Greg: Let me start by kind of touching on the tail end of the Biden administration. So last month, I attended a White House event looking at sustainable freight, which included a focus on sustainable marine fuels. Under the Biden administration and a kind of whole of government approach, several U.S. agencies released an action plan on sustainable shipping. And there's a current request for information with the Department of Energy to look at how to define sustainable marine fuels that we'll be responding to. The action plan had a pretty aggressive target for U.S. to produce 700 million diesel-equivalent gallons of sustainable marine fuels by 2030. So they kind of set that marker.
On January 5th, we saw the U.S. Treasury Department release its final regulations implementing the Inflation Reduction Act 45V Clean Hydrogen Tax Credits. And that included a provision that we sought by the Methanol Institute that recognizes the role of carbon utilization and how you valorize the production of methanol.
So there, we were looking at the carbon is not emitted in the production of methanol, but when you're producing a syngas product, it's the final product which will include the ways to valorize the hydrogen. So we think that there's a role now for conventional methanol and blue methanol in the value chain that could be compliant with the 45V Clean Hydrogen Production Tax Credits.
Then on January 12th or January 10th, we saw the U.S. Treasury Department issue initial guidance on the 45Z Clean Fuel Production Tax Credit. That included actually two important wins for methanol. First, low-GHG methanol was included as a qualifying fuel for the tax credit. We're written into the tax credit. Second, marine fuels are also included as qualifying fuels with methanol explicitly mentioned.
Now, initially, the 45Z Clean Fuel Production Tax Credit was only focused on road transport fuels, cars, trucks, and buses, and sustainable aviation fuels. But now we've expanded that for marine fuels and specifically for methanol.
That brings us to January 10th or 20th, which was the inauguration of President Trump. As we've seen on day one, President Trump initiated a series of executive orders declaring a national emergency on energy, unleashing American energy, putting America first in international environmental agreements, and pulling the U.S. out of the Paris Agreement. For shipping, again, that action plan that was released in December could be viewed as supporting an American-first agenda. So we think that action plan could actually be supported by the Trump administration as it focused on domestic energy production and use in shipping.
We'll have to see what pulling out of the Paris Agreement means for the IMO and its GHG ambition. I know from sitting in meetings in London at the IMO, the U.S. delegation is always one of the most active. As the IMO moves forward, looking at GHG certification, at carbon levies, we can expect the U.S. delegation there to take a very different tack going forward.
With regards to the IRA, since the 45V, final regulation was just issued in December, it can be subject to Congressional Review Act by the Republican Congress, which could look at rescinding some of those rules. Also, by executive order, President Trump has called for a freeze or potential clawback of some of the IRA funding.
However, we have to note that a lot of the IRA funding is going to Republican-held districts, creating jobs, creating local investment in Republican communities. So there is support there from the Republican majorities in both the House and Senate for some of the IRA tax credits.
On 45Z, again, since the Treasury just provided preliminary guidance and not a proposed or final regulation, there are many steps that are needed to cement the decisions to include methanol marine fuels as qualifying fuels. So a lot needs to be done there.
If we look at Trump's declaration of a national energy emergency, that's likely to be supportive of conventional methanol from fossil natural gas, as well as the use of carbon capturing utilization for low-carbon or blue methanol. So we'll be seeing deregulation in some of those markets. We're seeing increased production of natural gas. So all those factors could be advantageous for gray methanol or blue methanol production.
Cassidy: I guess we'll see kind of what his first 100 days look like and kind of how this starts to shake out for the U.S. in the next couple of months. Hopefully, it remains a positive outlook for methanol producers, low-carbon methanol producers, but only time will tell with that one as well. Would you agree?
Greg: Absolutely. One of the things that people talk about with the Trump administration, there's always a lot of uncertainty that the last person he talked to is kind of the one that can drive policy. I think that was probably more true in the first Trump administration. I think now coming in for a second time around, we can expect them to be more disciplined. The fact that they were able to issue dozens of executive orders on day one, that they have a plan, that they have kind of a supporting ecosystem, particularly on Capitol Hill now with Republican majorities in the House and Senate, we can probably expect to see them be a bit more successful this time around than perhaps they were in the first Trump administration.
But there's also, kind of an even shorter honeymoon then because there's that expectation that a lot is going to get done. We can also look at, you know, Trump is now not going to be seeking re-election in four years, so he's got to get everything done now.
We can also look at, you really have this first two years because we'll have additional, you know, congressional elections coming up in two years. And he may or may not maintain those majorities after the first two years. So there's going to be a lot riding on this initial couple of months, including, you know, trying to do one big legislative package that addresses all the tax issues, all the government funding issues. There'll be a lot on their plate in really just the next six months.
Cassidy: Hopefully, that moves through quicker. As you said, kind of the focus on the first two years. So we will see how that progresses and what kind of support that gets. And, the methanol market and world will pivot and adjust and keep moving on.
So I did want to jump a little bit back towards the methanol as the marine fuel side. We talked about that quite a bit, and that does seem to dominate a lot of conversations, especially with the policies and the incentives surrounding that. But there's a lot of other potential pathways, as you have mentioned, for methanol outside of the conventional use and the marine use.
So which one of those is kind of piquing your interest and your curiosity as it's starting to evolve?
Greg: I think there are two market segments that I think are going to be really interesting for methanol. And the first would be the use of methanol-to-jet as a sustainable aviation fuel. I serve on a ASTM working group right now that's establishing or looking to establish a standard for methanol-to-jet. And we expect to have an approved ballot probably this September. And an ASTM standard is essentially a golden ticket for the use of methanol as a feedstock for sustainable aviation fuels.
Now, that's not the use of methanol directly as an aviation fuel. We're not going to be putting methanol on planes, but to convert that methanol through olification process to a jet fuel or kerosene. There are actually two technology approaches there, one from ExxonMobil and Honeywell UOP, that would look at a 50/50 blend, a 50/50 blend of 50% methanol-to-jet and 50% conventional jet fuel. Another technology from Topsoe, which would be a blend of 20% methanol-to-jet and 80% conventional.
Given the wide range of feedstocks for methanol production, that methanol production technologies are mature, they can be done at scale, methanol-to-jet can be a real advantage pathway for sustainable aviation fuel. And since these technologies are largely an olification process, if we look at what happened in China with their methanol to olefins technology, where I think the first unit opened in 2011, there's now like 16 MTO plants in China that represent 14%, 15% of global methanol demand.
So we've seen that the industry can ramp up the supply to meet specific market opportunities. And methanol-to-jet could be another big one. We actually might see the airlines competing with the shippers for some of the renewable methanol and low-carbon methanol that we expect to see on the marketplace.
I'm also excited for kind of a broader set of market opportunities in using methanol for heat and power generation. And there, specifically, it's substituting methanol for diesel fuel and things like gensets for power generation, turbines, stationary power, combustion engines, which could open up new markets for methanol. And that includes temporary power for the use of gensets at, say, construction sites or big events like a Super Bowl or a big concert, but also can include use of turbines or engines to power offshore oil and gas rigs for direct power generation.
And then on the heating side, in China, they use literally millions of tons of methanol today as a clean cookstove fuel. There's methanol used for kilns, for glass and ceramic production, for industrial boilers, and commercial and residential buildings.
Really, anything running on diesel can run on methanol. And these are hard-to-abate sectors. These are often small distributed sectors. They're using a liquid-fueled diesel, so we can follow the same kind of infrastructure and supply mechanisms for diesel, but just replace it with a much cleaner fuel in methanol.
Cassidy: Wow, that's really interesting for both of those concepts. Do you see those really starting to gain traction globally, or is it kind of regionally focused as far as the heat and power generation? You mentioned China and then methanol-to-jet. Where do you see that kind of really...what region kind of taking the lead there?
Greg: On the methanol-to-jet, again, you've got some really big companies that are in this space, and you are already seeing announcements of companies that are going to be looking to produce that methanol-to-jet product, even in advance of having an approved ASTM standard. We saw the first flight of a methanol-to-jet plane that took alongside the COP meeting in Azerbaijan with Masdar and TotalEnergies. So we've actually seen the first plane take off using a methanol-to-jet process.
Certainly, when we look at some of these heating markets like cookstoves, boilers, and kilns, those are almost entirely markets in China today, but we're now seeing places like India begin to take off. We co-sponsored a seminar in Delhi two months ago, where companies like Kirloskar and several others in India demonstrated methanol-fueled gensets. And this can be, like, the small portable gensets that are 2 to 5 kilowatts up to larger 100 to 500-kilowatt gensets for power generation.
When you think about places like Delhi where every winter they have to shut down parts of the economy because of pollution, and a lot of that pollution is from burning diesel fuels, if you can use methanol, it's a much cleaner alternative.
So some of those markets, particularly in developing countries in Asia, Middle East, Africa, could be really attractive for these technologies. And I'd also add too, methanol is a great hydrogen carrier fuel. When you look at the molecule CH3OH, it's a liquid fuel with the highest hydrogen-to-carbon ratio. And because there are no carbon-to-carbon bonds in a methanol molecule, it readily releases its hydrogen. So we can use methanol as a hydrogen carrier for fuel cell technologies that can be used in mobility, that can be used in stationary power applications. And we're actually seeing now that technology is being commercialized, and by several members of the Methanol Institute.
Cassidy: That's really interesting to hear as well. So one final question for you. Hopefully, this is a fun one. We've covered a lot of what's going on in the methanol market, and thank you so much for sharing all of your insights. But, you know, after all the meetings, the presentations, the podcasts are done and over with, what kind of themes or questions keep you up at night? Whether it's, you know, how are we going to accomplish X? Or I can't wait to see methanol being used for this. What keeps you up at night? What are you thinking about?
Greg: Maybe I can put those, kind of the biggest challenges that we're facing in two words. Impatience and expediency. You know, we don't flip a switch and achieve sustainability goals overnight. Too often, we use kind of political short-hand solutions like, oh, that molecule doesn't have a carbon in it. That must be the best solution going forward.
These discussions around future fuels for shipping, for example, is often presented as a binary choice. You have a polluting diesel bunker fuel or you have some synthetic e-fuel, and there's nothing in between. We see this more in all of the above proposition. There's no single winner. There's no single loser. The key to the transition is going to be for sustainable fuels is going to include blending.
So we can take conventional methanol or low-carbon blue methanol, blend in some biomethanol or even less e-methanol, and meet whatever carbon intensity target is being set. You know, in this way, GHG emissions can steadily decline as the supply to the more expensive biomethanol or e-methanol grows over time.
Unfortunately, we also see for politicians, they like to see their positions wrapped in a 140-character tweet. I'm old-school. I used to say if you wanted to get something across to a member of Congress, you had to be able to get it on a 3 by 5 index card but now it's 140-character tweet or X or whatever the verb for that is. But, you know, what we're seeing now is that market reality takes a lot more thought and a lot more work.
Related products
Spotlight content
![People at a board room](/_next/image?url=%2F-%2Fmedia%2Fproject%2Fargusmedia%2Fmainsite%2Fenglish%2Fimages%2Fpeople%2Fcontact-us-forms%2Fcontact-us-form-people-01.jpg%3Fh%3D530%26iar%3D0%26w%3D1600%26rev%3D-1%26hash%3D15ADB845C50D6050F16F434C347C419B&w=3840&q=75)