Analysis of the Impact of Covid-19 on Methanol Market

The major impact of Covid-19 on the global methanol market is the reduction in production capacity across the globe and the rise in the price of methanol. 

The global methanol production takes place in various countries (in the descending order of their capacities), including China, the United States, Iran, Trinidad, Saudi Arabia, Russia, Venezuela, Malaysia, New Zealand, Oman, Germany, and Egypt. These countries have been planning for new capacity additions in 2019 and 2020. However, due to the ongoing lockdown and epidemic control measures, these capacity additions are expected to be delayed to Q3 2020.

There has been a decline in the international oil price and WTI experiencing negative oil prices, setting a new historical drop. That decline in prices has its effects on the downstream chemical industry and its pattern of demand and supply.

Amidst the pandemic, countries are observing nationwide lockdowns that have affected the manufacturing and logistics and the transportation sector. Most of the methanol plants have either reduced production or shut down plants, which is going to change the scale of supply of methanol in the long run. A global leader in the methanol market, Methanex has announced the temporary shutdown of its methanol plants in Chile and Trinidad from the beginning of April 2020. Most of the methanol plants in China are also undergoing maintenance, and their operating rates have declined in the past two months. 

The effect of the pandemic is also high in Iran (third-largest producer of methanol) with consistent growth in the live Covid-19 cases. Iran exports a majority (about 35%) of its methanol to China, which uses methanol in the downstream chemical industry.

The ongoing maintenance and declining operating rates are likely to result in the inconsistent supply of methanol in the third quarter of 2020. This issue of irregular supply coupled with increasing demand from the downstream chemical industry is likely to upbound the prices of methanol in the coming months. 

Since January 06, 2020, Brent crude oil price has declined from USD 68.91/barrel to USD 30.89/barrel as of May 06, 2020. Healthy growth in international oil prices is most likely to contribute to the increase in methanol prices. Methanol is an alternative to crude oil as a feedstock to produce various chemicals, and in transportation, they are mutually dependent on each other’s price. The growth in demand for oil will take place along with the decline in the pandemic across the globe.

John Floren, CEO, Methanex, said: “We anticipate that methanol demand could be impacted in the second quarter of 2020 as there has been a substantial reduction in manufacturing activity in countries that have had significant outbreaks of COVID-19.”

Detailed analysis of the Impact of Covid-19 on Methanol Market will be available in our Full Report. 

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