Rising demand for methanol as a fuel or fuel additive and low natural gas prices in the U.S. are driving Methanex Corp. (TSX:MX) to spend $550 million to move one of its idled methanol plants to the U.S.
Dismantling the plant, shipping it to the Gulf of Mexico and up the Mississippi River and reassembling it in Geismar, Louisiana, will be an engineering feat. The relocated plant will create 1,500 jobs during the construction phase and 130 full-time jobs when it goes into production by the end of 2014.
The relocation is just the latest move by Methanex to ramp up production to meet growing demand – a demand Methanex has helped create, according to Gregory Dolan, acting CEO of the Methanol Institute.
“The industry is making a significant transition from a traditional chemical commodity to a real energy resource,” he said.
“When you look at the broader methanol industry on a global basis, Methanex is really the leader when it comes to looking at these emerging market opportunities.”
Methanex also restarted one of two idled plants in New Zealand last month, and last year restarted one in Medicine Hat that had been idle for a decade.
Methanol is used to make plastics, paints, building materials, polyester and pharmaceuticals. But its growing use as a fuel or fuel additive, especially in China, is driving the rising demand.
Historically, annual demand for methanol grew at 4% to 5%, in line with industrial growth, said Jason Chesko, Methanex’s director of investor relations. Current forecasts are for 8.5% annual growth.
“Over 10% of all methanol being used in the world is used in vehicles in China,” Chesko said.
Methanex is the largest methanol producer in the world, with 1,000 employees worldwide and 15% of global market share. It is one of the few companies that has the excess refining capacity and financial wherewithal to quickly ramp up production to meet increasing demand.
At the end of July, Methanex reported second quarter earnings of $113 million – a 22% increase over the previous quarter.
Methanex owns one plant in Egypt, one in Medicine Hat, three in New Zealand and four in Chile. It also owns its owns a shipping company, Wavefront Shipping, which operates 19 deep-sea tankers to deliver its own product and other chemicals.
Despite the increasing demand for methanol, three of Methanex’s four Chilean plants have been idle. Due to domestic demands in its own country, Argentina stopped supplying natural gas to Methanex’s Chilean plants. Methanex is now investing in gas exploration in Chile in the hope to finding a new supply.
“Depending on how gas development goes in Chile, we may end up moving another plant,” Chesko said. •
