Market Insights

Market Insights

Where Grey Meets Green: The Evolving Global Methanol Market

As the methanol market demand continues to rise, methanol as fuel demonstrates an increase in green methanol projects around the world.

Global methanol market demand was approximately 90 million metric tons in 2022. Methanol goes into a wider variety of end-use applications, including chemical applications such as formaldeyde (for man-made boards) and acetic acid for paints and coatings. In mainland China it is a gateway to olefins and polyolefins via Methanol-to-Olefins or MTO. It goes into various fuels applications; as a direct blendstock into gasoline, mainly in mainland China; MTBE; FAME or biodiesel; and DME, to be blended into LPG or for us as an aerosol propellant.


The traditional methanol market demand model is often called "grey" methanol and comprises 99% of the methanol market, with a capacity of 1-2 million metric tons per annum and the accompanying economies of scale.


Grey Methanol: 99% of the Current Methanol Market but one of the Most Heavily Transported Chemicals in the World


The existing or “old” world of methanol is generally made up of world-scale production units, with a capacity of between 1 and 2 million metric tons per annum, with the accompanying economies of scale. The feedstocks for methanol production are generally coal (almost exclusively in mainland China) and natural gas in the Middle East, Americas, Southeast Asia and other basins around the world. In mainland China, coking gas can also be a low-cost feedstock for the production of both methanol and ammonia, but as a by-product of steel manufacture, its availability is dependent upon the state of the national and global steel industry. In Europe, there are several relatively small refinery-based units that use by-products such as heavy liquids and off-gases; these are not subject wholly to the economics of the methanol industry, but are driven by complex, integrated refinery economics.

Many methanol plants are located in clusters, generally where stranded or low-cost raw materials can be sourced, such as Saudi Arabia, mainland China, the US Gulf coast, Trinidad, Iran and Malaysia. With so much methanol being sourced in locations driven by abundant feedstock availability, millions of tons of methanol are shipped to the global demand centres every year. Around 35% of methanol, or 32 million metric tons, is sold in a different region from that in which it was produced, making methanol one of the most heavily-transported global chemicals.

Methanol production routes can be categorized by various colours, although many of these are used quite loosely with no universally accepted definitions. Around 99% of the current market is “grey” methanol, manufactured from traditional hydrocarbon feedstocks, although coal-based methanol in mainland China is referred to as “brown” methanol. Standard prices apply to grey methanol, which is subject to any carbon taxes.


What is Green Methanol, and Why is it Growing Fast?


The “new” world of methanol, on the other hand, is focused on production via more sustainable methods. There are few existing units capable of producing less carbon-intensive methanol, so this market is currently not material in the context of the global methanol industry, but it is growing fast and has generated a huge amount of interest in the last few years. This developing segment of the industry is also categorized by various terms. Green methanol is a term that defines methanol produced in a lower-carbon manufacturing process. Blue methanol generally refers to methanol production that utilizes carbon capture and storage. Biomethanol can be produced from feedstocks such as biomass and municipal waste. Renewable methanol combines hydrogen generated from renewable electricity (from sources such as solar or wind) with carbon dioxide that is a waste stream from an industrial process such as cement production, or from direct air capture.


Green methanol is a developing segment of the methanol market, where production is focused on sustainability. The green methanol market is small but growing rapidly due to tax incentives and changes in environmental policies worldwide.


Green Methanol vs. Grey Methanol: How Methanol as Fuel is Driving Market Trends


On a unit cost basis, green methanol production is significantly higher-cost than grey methanol production. This differential is expected to diminish over time as green methanol production units become bigger and more efficient and as the cost of carbon increases. It is possible to secure price premia for green methanol – these tend to be a closely-guarded commercial secret – but only for limited volumes into specific end-use applications. Whereas grey methanol may target demand centres in other regions, green methanol output is generally more focused on local offtakers.

Methanol market demand growth over the last decade has been pushed up to a level well above that of GDP growth by an increase in demand for MTO, or Methanol-to-Olefins; these units, all in mainland China, purchase merchant methanol for production of ethylene and propylene and various derivatives. Long-term demand growth into fuel applications such as direct blending into gasoline and MTBE is set to decline, impacted by improved vehicle efficiency standards and the move to vehicle electrification. As a result, methanol demand growth is more dependent upon traditional chemical applications such as formaldehyde, acetic acid, MMA and solvents.

However, there is some potential upside for green methanol market demand: into biodiesel, boosted by national mandates; into fuels uses in mainland China such as methanol-fuelled boilers, kilns and cooking stoves; and methanol as fuel for marine vessels. Chemical Market Analytics was of the view that methanol’s relatively low energy content made it unsuitable for deep-sea shipping movements – apart from when used as a fuel by methanol producers on their own vessels – and therefore that it had a relatively limited role; for short-haul or inland shipping – e.g., barges, ferries, pilot vessels etc.

There have been many announcements in the last two years of orders of methanol-ready vessels, by major shipowners such as Maersk, CMA-CGM, Stenaline, Höegh Autoliners, Ocean Network Express and Cosco. As a result, it looks like green methanol as fuel has a more mainstream role to play in the world of shipping than previously anticipated. From a very low current base, Chemical Market Analytics’ latest supply-demand balances will show demand for methanol as a marine fuel rising fast, to close to 15 million metric tons by 2050.


Global Bunker Fuel Demand chart by Chemical Market Analytics by OPIS: demand for methanol as fuel for marine vessels is rising fast, with a forecast of nearly 15 million metric tons by 2050.


Green methanol projects have been announced in many locations, with West Europe leading the way, but projects are also being planned in the US, mainland China, Egypt, Uruguay, Australia and the UAE, to name but a few. Most of the offtake from these units is being targeted at methanol as fuel, although there is also some interest from chemical consumers. Some shipowners are forcing the issue, trying to solve the “chicken and egg” problem of supply being insufficient to meet demand that isn’t necessarily confirmed. Maersk, for example, is aligning itself with various green projects worldwide, not as an equity stakeholder, but as an off-taker.

Chemical Market Analytics will explore this topic in more detail at the company’s World Chemical Forum, 12-14 September in Houston, TX, US; and will extensively cover green methanol and methanol as a marine fuel at the World Methanol Conference, 25-26 September in Vienna, Austria.



Mike Nash
Vice President

Xiaomeng Ma

Javier Ortiz

Shreya Kansara
Senior Research Analyst

Geoffrey Mullett


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