Methanol is one of the most useful chemical productions which is used frequently in downstream industries. Anti-freeze, glue, poison, pesticide, MTBE (Methyl Tert-butyl Ether) , DME (Dimethyl Ether) are the most important products derived from methanol. In recent years, methanol is produced from two main sources including coal and natural gas. However in the past, companies mainly used natural gas to produce methanol and in 2008 for instance, only 18% of their need was provided by coal. In 2013, above proportions changed and the share of coal‘s consumption increased to 26%. As a result, considering, which countries are producing methanol, the price can be affected from coal or natural gas prices based on their accessibility to the mentioned resources.
According to recent study in 2015, Asia Pacific remains the largest producing and also consuming region with more than half of global production and 65% of world`s demand; Middle East and Africa are in the second place.
Top 5 methanol producing countries include China, Saudi Arabia, Trinidad and Tobago, Iran and Russia. Based on IHS (Information Handling Services is a research company based in London, United Kingdom) studies in 2015, global nominal capacity of methanol was over 120,789 thousand Tons and the market share of China in methanol’s global production has increased during recent years (It was 44% in 2013 according to Methanex (Methanex Corporation is a Canadian company which supplies, distributes and markets methanol worldwide) ). Due to big market share and also presence of 98% of coal based producing units of China, changes in coal price can have effect on methanol price.
The trend of changes in price of Australian grade coal is shown in the figure below. It displays about 75% growth in coal price from October 2015 to October 2016.
Description: Coal, Australian thermal coal, 12000- btu/pound, less than 1% sulfur, 14% ash, FOB Newcastle/Port Kembla
On the other hand, global price of methanol has started an increasing trend since two months ago. The trend of methanol price in the last four recent months (August, September, October and November 2016) is shown below:
Description: Transportation costs are included in the price
Therefore, regarding existing evidence, there is a positive correlation between methanol and coal prices. It is anticipated that the price of methanol won’t decrease in a near future because there is a bright horizon for relative stability in coal and Methanex contracts’ prices.
At the moment, Iran`s capacity is approximately 4% of global nominal capacity, i.e. 5,044 thousand Tons. Zagros Petrochemical Company with production of 3 million tons is one of the biggest methanol producers in the world which has possessed 65% and 2.7% of Iran and global producing capacity respectively.
In 2015, 66% of Iran’s methanol export occurred through Zagros Co. Due to the unused capacity of Zagros which is around 10%, besides of methanol increasing price, there will be a fascinating opportunity to invest in Zagros.
To conclude, it is necessary to notice all aspects which affect prices. As a result, some factors like supply and demand have direct effect on price and feedstock price is such a factor which has an indirect effect. In this regard, the prices of coal and natural gas as methanol’s feedstock should be considered in order to estimate methanol’s price. Due to the increasing price of methanol, it seems that this sector has a great potential to growth. In addition, some companies in methanol sector like Zagros Co. have advantages comparing to peer companies and they can be attractive for foreign investors.