East Asian Meth Lab
China is the largest producer and consumer of methanol. The Chinese blended nearly 1 billion gallons of methanol in gasoline last year. Taxi and bus fleets already run on high-blend methanol. Gasoline stations sell low-blend methanol at the pump, just as U.S. stations sell low-blend ethanol.
The stakes are high for China, as the country makes methanol from coal — which it has plenty of — and reduces its dependence on foreign oil. Between 2008-2012, Chinese methanol demand will increase at a 16% annual rate.
The Chinese also use blended methanol (called DME) for home heating and cooking — a demand that is growing at double-digit rates. You can use up to 20% without changing equipment. The biggest hurdles are in the distribution network. China makes methanol in the central part of the country and must get it to the coast by truck or rail. But clearly, methanol use is growing rapidly and has much government support.
Globally, these are the primary energy applications for methanol, and they are growing rapidly.
Other countries looking at methanol include India and Malaysia. There are no technical hurdles to make the switch to methanol and many positives for doing so — there is a large and varied feedstock available, plus the technology is mature, efficient and inexpensive.
I won’t bother with a prediction on methanol prices, which is like trying to figure out a Chinese film without subtitles. But the long-term demand looks secure and upward leaning — usually supportive of good prices. And methanol prices usually track oil prices, also on a long-term upward trajectory. That makes methanol a big opportunity for the low-cost producers.