New methanol plants to increase natural gas use, Flat chemical activity barometer signals slower growth rate 1H 2019, Westlake Chemical to expand vinyls capacity

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Natgasoline Methanol Plant in Beaumont, Texas

New methanol plants expected to increase natural gas use through 2020

New methanol plants under development in the U.S. are increasing natural gas consumption in the industrial sector.
Methanol plants are among the most natural gas-intensive industrial end users and require natural gas both as a feedstock and for process heat.

Three new plants expected to come online in 2019 and 2020 have a combined nameplate capacity of about 3.3 million tonnes/year, and would increase total U.S. methanol capacity to 9.4 million tonnes/year, or 25,600 metric tons per day (mt/d)—a 45% increase from the current U.S. capacity, according to the U.S. Energy Information Administration (EIA).

Total U.S. industrial natural gas consumption is expected to average 23.1 billion cubic feet per day (Bcf/d) in 2019 and 23.4 Bcf/d in 2020, up from 22.6 Bcf/d in 2018, according to the EIA.

Most methanol plants are in the Gulf Coast region. Existing pipeline infrastructure in the region will allow increasing natural gas production from the Permian Basin in West Texas and New Mexico to reach methanol production facilities along the Gulf Coast.

Proximity to the Gulf Coast allows many of these plants to export methanol to China, a major consumer of methanol.
Relatively low natural gas prices in recent years have provided incentives to develop new methanol facilities.

One new methanol plant, the 5,000 tonne/day Natgasoline methanol plant in Beaumont, Texas, began operating in June 2018. According to the operating companies (OCI N.V., Consolidated Energy Limited and Natgasoline LLC), the plant has consistently been running above its nameplate capacity. The new plant is the largest methanol production facility in the country, consuming an estimated 0.15 Bcf/d of natural gas.

During 2019 and 2020, two new methanol plants on the Gulf Coast are expected to begin operating. Big Lake 1, owned by GX2 Energy and Methanol Holdings, Trinidad, is expected to enter service during the third quarter of 2019 in Louisiana. The Big Lake facility will convert dry natural gas into about 3,800 tonne/day of methanol, which may then be converted to motor gasoline.

In addition, the Yuhuang’s St. James 1 methanol plant, with a capacity of 4,700 tonne/day, is expected to start operating in mid-2020 and would be the second-largest methanol facility in the U.S. Phase two, which is currently under consideration, could double its capacity, which would make it the largest methanol production facility in the United States.

In addition to these Gulf Coast methanol plants, Liberty One in West Virginia is expected to produce about 550 tonne/day of methanol when it comes online in 2019. Liberty One is a much smaller methanol-producing facility that is relocating from Rio De Janeiro, Brazil. Liberty One’s proximity to the Appalachia Basin ensures natural gas feedstock at a relatively low cost to the plant.

Flat chemical activity barometer signals slower growth rate 1H 2019

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted a 0.0 percent change in February on a three-month moving average (3MMA) basis. On a year-over-year (Y/Y) basis, the barometer is up 0.2 percent (3MMA).

“The Chemical Activity Barometer reading was essentially flat in February following three months of decline,” said Kevin Swift, chief economist at ACC. “The cumulative drop was 1.0 percent – still well below the 3.0 percent threshold for a recession signal. The latest CAB signals gains in U.S. commercial and industrial activity through mid-2019, but at a slower rate of growth as compared with a year earlier.”

The government shutdown resulted in delays in publishing many data series that ACC uses to compare the CAB. Such delays can make it more difficult to gauge current economic conditions.

The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.

All four major components rose in February. Trends in construction-related resins, pigments and related performance chemistry were mixed and suggest slow housing activity. Despite weakness in the latest retail sales report, plastic resins used in packaging and in consumer and institutional applications were positive. Performance chemistry gained and U.S. exports were mixed. Equity prices rebounded sharply this month, and product and input prices rose as well. Inventory and other indicators were positive.

The CAB is a leading economic indicator derived from a composite index of chemical industry activity. The chemical industry has been found to consistently lead the U.S. economy’s business cycle given its early position in the supply chain, and this barometer can be used to determine turning points and likely trends in the wider economy. Month-to-month movements can be volatile so a three-month moving average of the barometer is provided. This provides a more consistent and illustrative picture of national economic trends.

The CAB comprises indicators relating to the production of chlorine and other alkalis, pigments, plastic resins and other selected basic industrial chemicals; chemical company stock data; hours worked in chemicals; publicly sourced, chemical price information; end-use (or customer) industry sales-to-inventories; and several broader leading economic measures (building permits and new orders). Each month, ACC provides a barometer number, which reflects activity data for the current month, as well as a three-month moving average. The CAB was developed by the economics department at the American Chemistry Council.

Westlake Chemical de-bottlenecks PVC capacity

Westlake Chemical will continue to use de-bottlenecking and other operation efficiencies to expand production capacity for its vinyls segment, the company said in its most recent earnings call.

Westlake previously announced that it would expand polyvinyl chloride (PVC) capacity by 340,000 tonnes/year globally at its Geismar, Louisiana, and Burghausen, Germany plants. The expansion will be complete this year.

Westlake posted higher sales but lower profit in 2018. The company reported full-year sales of more than $8.6 billion, up more than 7 percent vs. 2017. But the firm’s profit tumbled almost 24 percent to just under $1 billion.

Westlake’s 2018 sales for its vinyls unit — including PVC materials, pipe and fence — grew 10.5 percent to more than $6.6 billion, but sales for its olefins unit — including PE — slid almost 2 percent to just over $2 billion.