Methanol demand down and expected to fall further

Methanex, which has a plant in Medicine Hat, says global demand for methanol declined seven per cent in early 2020, but it expects steeper decline in the spring as global trade slows and the price of crude oil remains low.

The global producer that has major manufacturing facility in Medicine Hat reported in its first-quarter financial statements on May 6 that it expects unpredictable conditions to worsen before they improve.

“We are navigating extraordinary times as the COVID-19 pandemic has created unprecedented turmoil and uncertainty in people’s lives and the global economy,” stated CEO John Floren, adding that at this point global supply chains and economic activity, while affected, appear to be operating well.

In April, the company idled two of its plant sites in Chile and Trinidad, and delayed US$500 million in capital spending on a planned expansion at the company’s facilities in Louisiana.

Production in Medicine Hat remained near full capacity.

The company is however, “planning for a wide range of scenarios, including ones in which we see a deeper and more prolonged reduction in methanol demand and low prices.”

Methanol is used in chemical and plastics production, as a solvent and fuel alternative to gasoline. Low oil prices bring down the cost advantage of methanol over traditional fuels, and also affects oil exploration which in reverse effects the price of natural gas, increasing feedstock costs for methanol producers.