Link to Fitch Ratings' Report: North American Methanol Dashboard (August
2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=886306
The rebound in North American methanol prices will be protracted,
despite favorable long-term demand trends, due to continued low oil
prices, further global capacity additions, and a lower North American
premium, Fitch Ratings says.
Global methanol prices have recovered somewhat from their 2016 lows due
to higher demand from newly commissioned Chinese methanol to olefins
(MTO) facilities and the rebound in oil prices that began late in the
first quarter. However, the expected start-up of additional capacity,
including OCI N.V.'s 1.8 million tonne methanol facility in late 2017,
and our revised long-term crude oil projections, will likely mute much
of the benefit of the rebound in oil prices in the near term.
The shrinking US methanol supply deficit and reduced international
shipping costs have reversed the price premium enjoyed by US producers
over China, adding to the decline in global prices. Five million tonnes
in new US supply since the start of 2012 more than doubled U.S. capacity
and reduced U.S. methanol imports by nearly 30% between 2012 and 2015.
Low-cost North American producers will remain competitive in a pressured
oil price environment, although depressed prices have strained their
credit metrics. Fitch forecasts Brent and WTI will remain at
approximately USD42 a barrel in 2016, but our long-term oil forecast of
USD65 a barrel has historically equated to roughly USD350/t for
methanol. Fitch expects the US will likely remain a net importer of
methanol through the next few years, but some differential should return
as overall demand increases.
China is the largest consumer of methanol and the main demand source for
energy applications, such as fuel blending and MTO. MTO profitability
has been reduced by the fall in the price of crude oil derivatives.
However, we believe integrated MTO facilities have been running at
generally healthy operating rates, buoyed by strong end-market demand
for plastics. We expect China will continue to drive pricing trends and
serve as an important export destination for North American merchant
methanol producers as an additional three new Chinese MTO plants are
scheduled to come online in 2016.
For more information, see Fitch's methanol dashboard at the link or on www.fitchratings.com.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article can be accessed at www.fitchratings.com.
All opinions expressed are those of Fitch Ratings.
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Copyright Business Wire 2016
Source: Business Wire
(August 18, 2016 - 11:14 AM EDT)
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