In an important, but inevitable, change in tone, it is worth noting that the Borouge ethylene expansion announcement includes the idea that the complex will explore the possibility of a major carbon capture facility that will take much of the CO2 from the existing complex as well as the new plant. We have stated previously that the mood has changed sufficiently such that large industrial investments without a carbon abatement plan will not get approval from stakeholders and this is a prime example of what we expect. Locations with low-cost CCS will see disproportionate investment in our view and Abu Dhabi already has CCS in place as Adnoc is selling blue ammonia already to Japan. As we noted in a recent Sunday Piece, we expect carbon abatement challenges to slow expansions in basic chemicals and, despite this announcement by Borealis, see a market shortage in 2024/25 as a consequence.
Global commodity chemicals are often a relative rather than an absolute game, especially where there is significant international trade. The global price of natural gas has risen dramatically, especially in countries or regions where the marginal BTU is coming from imported LNG – see yesterday’s daily report for a comparative chart. The US may be seeing much higher natural gas prices but other parts of the world have it much worse, and with most of its methanol capacity in regions/areas with very competitive natural gas, it is not surprising that Methanex is upbeat. The higher natural gas price in the US is giving Methanex and other US producers the ammunition to raise prices and the higher costs outside the US mean that international volumes are going to find more attractive markets in many locations versus the US. While we have seen some moves to create low carbon polymers and low carbon ammonia, this has not come to methanol yet and methanol does have one of the largest CO2 footprints, per ton of product. While Methanex is currently talking about returning surplus cash to shareholders, there may come a time – sooner rather than later – when some of that cash gets redirected to carbon abatement.
Our latest Sunday Thematic report, "Damned if you Dow and Damned if you Down’t. Hard to win", centers around Dow's announced development of a new net-zero carbon emissions site in Alberta, Canada. It discusses company-specific and sector ramifications for Dow's strategic move to produce low-cost low carbon polyethylene in Canada while also expanding capacity.