North American Methanol Production To Stay Advantaged, Lower Margins Still Likely In 2H24

Daily Chemical Reaction

North American Methanol Production To Stay Advantaged, Lower Margins Still Likely In 2H24

Key Findings

• General Thoughts: Western methanol markets tightened substantially relative to Asia in 1H24, partly due to production issues. North American methanol producers currently enjoy some of the highest margins globally.
• Supply Chain/Commodities: North American commodity chemical results beat expectations in 1H24, but we see more production putting downward pressure on prices in 2H24. We also discuss the ACC 2024 Mid-year Outlook.
• Energy/Upstream: US Permian natural gas prices have collapsed relative to other North American markets in late June, and we also discuss global chemical feedstock infrastructure and supply developments heading into 2H24.
• Sustainability/Energy Transition: We discuss efforts to produce clean hydrogen, ammonia, and methanol in low-cost regions to address demand and decarbonize high-cost areas. Full value chain economics must be considered.
• Downstream/Other Chemicals: High US interest rates and its relatively strong economy have spurred support of the US Dollar relative to many other foreign currencies, which we consider a US export headwind for some.

Exhibit 1: North American methanol producers have a sizable production cost advantage relative to Asia and Europe. However, we foresee North American methanol prices (see Ex. 2) dropping later this year, pinching margins in 2H24.

Source: Bloomberg, C-MACC Analysis, June 2024

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