Methanol is exported with difficulty

Deliveries abroad of Russian methanol that fell under the sanctions in 2023 risk falling by at least 20%, and prices for this type of raw material may fall by the same amount. This, according to industry players, will reduce the profitability of producers to a minimum, which, however, can offset the decline in exports by increasing processing into products of a higher added value.

Exports of methanol from Russia, the supply of which to Europe was banned under the eighth package of sanctions, in 2023, according to some market participants, may fall by more than 20%, to about 1.6 million tons. Other interlocutors of Kommersant call this assessment too optimistic and believe that the fall will be greater. In 2022, methanol exports, despite Western restrictions, grew by 14%, to almost 2.1 million tons. The main directions of shipment were Finland (about 860 thousand tons) and Belarus (more than 835 thousand tons). At the same time, only about 165 thousand tons of methanol passed through points in the Far East. In the current situation, only two companies managed to increase exports – Shchekinoazot (almost 1.1 million tons) and Metafrax (about 470 thousand tons). According to the results of 2022, Shchekinoazot became the largest exporter.

According to official data from Rosstat, over 11 months, methanol production in Russia amounted to 4.1 million tons, which is at the level of the same period in 2021, of which 1.9 million tons were exported (an increase of 5.8%). Kommersant’s interlocutors explain such high results by the fact that the export ban was introduced only in October, although supply problems began in the spring. However, due to the high performance of the first three quarters, it was possible to achieve growth at the end of the year.

In the Ministry of Industry and Trade, which in the near future is proposed to transfer control over the turnover of methanol under the upcoming legislation, Kommersant explained that the sanctions in October came into force only in part of the new contracts. “At the same time, under the sanctions regime in 2023, manufacturers are looking for alternative directions for supplies,” they said. The companies themselves did not comment on the situation.

This year, Kommersant’s sources expect a significant restructuring of the methanol export structure. According to Kommersant’s interlocutors in the largest companies in the sector, it will move towards the Far East, where it will reach about 700 thousand tons. Gazprom methanol and Metafrax will mainly redirect their volumes there. But, industry experts believe, an increase in supplies could trigger a decline in prices in Asian markets.

At the same time, deliveries through Finland, which has been the main export route for many years, will drop significantly (to about 200,000 tons). Shipments through Belarus are forecasted by market participants at the level of about 525 thousand tons, export via the Black Sea, in their opinion, will not change and will remain at the level of about 115 thousand tons.

One of Kommersant’s sources in the chemical market believes that in 2023 the methanol production sector will face a serious blow, and the income of Russian producers will fall several times, including due to lower prices. Independent expert Leonid Khazanov expects a 10-20% fall in methanol prices on world markets due to weak demand in Europe and Asia, where new lockdowns may begin. The profits of most companies will be minimal. “One of the options in this situation is to try to minimize losses by increasing our own capacities for processing methanol into the same fertilizers that have been withdrawn from Western sanctions,” says Kommersant’s interlocutor.

Now, market participants note, the capacity of domestic consumption is limited and it is unlikely that it will be possible to significantly increase it in the near future. Although, for example, in November 2022, President of the National Automobile Union (NAS) Anton Sharapin proposed to Prime Minister Mikhail Mishustin to expand the Russian methanol market by lifting the ban on the production of an antifreeze liquid based on it (annual production volumes are about 400 thousand tons) . In his letter, the head of the NAS indicated that this would support domestic methanol producers, as well as increase federal budget revenues by bringing this sector out of the shadows. But market participants doubt the reality of this option, given that methanol fumes are poisonous and can harm the health of drivers.

Olga Mordyushenko