As methanol prices rise, biodiesel industry takes notice

By | November 10, 2006
Average methanol contract prices, which had been steadily hovering at just over $1 per gallon since December 2005, jumped to $1.33 per gallon in September and $1.80 per gallon in October, according to Methanex Corp., a global producer and marketer of methanol.

Greg Dolan, vice president of the Methanol Institute, told Biodiesel Magazine that prices rose drastically because two of the largest methanol plants in the world experienced unplanned outages. The plants, located in Trinidad and Equatorial Guinea, each had unexpected mechanical problems in August. "These plants supply a good deal of methanol coming into the United States," he said. Both producers claimed force majeure, which is a clause that excuses a party from liability if an unforeseen event, beyond control of the party, prevents it from performing its contractual obligations. "Once that happened, we saw a real restriction in methanol supply," Dolan said. "Under a force majeure, contract customers were given a very specific allocation, which was some percentage less than they were actually contracted for. Some consumers were buying up spot volumes when available, which became extremely limited."

Dolan said both methanol facilities returned to full production by early September. At press time, they were in the process of rebuilding inventories and getting ships out to their customers. "Most observers are hopeful that the price increases that were seen in August, September and October will begin to ease as we get greater supply," he said. This unique situation could be compared to ethanol's situation earlier this summer when spot prices were over $5, Dolan said. "We have not seen [methanol] price swings of this magnitude in over a decade," he said. "This methanol price swing pales in comparison to normal ethanol price swings."

Nevertheless, the price increase demonstrated how methanol impacts the biodiesel industry. Similarly, methanol producers are keenly aware of biodiesel's influence on their industry. "As one of the major feedstock suppliers to biodiesel producers, our industry is very excited about the growth potential in the biodiesel industry on a global basis," Dolan said.

That growth potential is why biodiesel was a featured topic at the Methanol Institute's 2006 Methanol Forum, held Oct. 18-19 in Houston. The session on biodiesel around the world included a global outlook and discussion on biodiesel legislation. The panel received an update from the Malaysian Palm Oil Board as well as a producer's perspective from Bill Spence, CEO of Galveston Bay Biodiesel in Texas.

This was the Methanol Institute's fourth annual conference. This year's theme, "Methanol's Role in the Global Energy Economy," opened the floor for discussion about the booming Asian methanol market, MTBE and clean fuels, and the potential role of M85 (85 percent methanol blended with 15 percent gasoline) as a transportation fuel. Program sessions focused on the latest issues impacting methanol, biodiesel and dimethyl-ether.
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