Cassidy: Welcome to the "Methanol Market Puts-and-Takes" podcast, part of Argus' "Chemical Conversations" podcast series. Cassidy Staggers here, joined by Argus' lead methanol consultant in Asia, Becky Zhang. This month, we're excited to talk about all things China biomethanol, a bit of a big emerging market with a lot of great potential. Becky, what's the current status for green biomethanol in China right now?
Becky: Hi, Cassidy. I'm very happy to talk about the RED biomethanol new assessments in Asia. And the Asia green methanol market is really developing rapidly in the recent month. We have seen commercial trade starts from this spring. From March to May, we have already seen 6,000 tons of green methanol bunkering activity at Shanghai Port in East China and 5,000 tons of green methanol exports from North China Tianjin Port. And there are continued ongoing discussions between suppliers and shipowners for further spot trade discussion and long-term off-take agreement negotiations. These trades are driven mainly, I think, by the active by-tenders from shipowners.
We have seen top shipowners like Maersk, CMA CGM, COSCO, Evergreen, Hap-Lloyd, HMM. They will see their new methanol dual-fueled fleets delivery starting from 2025, peaking in 2026, '27. And we see IMO's new two-tier pricing mechanism, which is clearly encouraging the usage of green fuels, especially beyond 2030. Although the initial request volume for green methanol from shipowners could be limited because of the high-cost concerns of green methanol prices, and relatively easy decarbonization targets set by EU and IMO. Most shipowners would prefer to conduct only some bunkering trials to prepare for the future and for the sake of brand image. Yeah.
But however, the current market is still under-supplied. In Asia, we only have one Chinese producer who could supply large-volume biomethanol with ISCC EU Platts certification and is also UDB registered, which is Towngas 550-kt unit in Inner Mongolia. And two other producers in China who can supply ISCC-certified materials are mainly based on biomethane process and in very small scale, only producing 200 to 400 tons per month of biomethanol.
So, therefore, the most important point of interest in this industry now is whether the new-built Chinese projects can be started smoothly. We are expecting three new Chinese biomethanol plants starting up by the end of this year. The three companies, they adopt different biomass gasification technologies, fluid bed, fixed bed, and airflow bed. So, now, all eyes are on these projects because these will set an example or milestone for the industrialization of biomass gasification technology.
And the first one, the first project which is starting up very soon is Shanghai Electric's 50-kt hybrid unit. They use their own fluid bed technology plus green hydrogen. It's expected to start up on 30th of June. And the second one will be CIMC Enric's 50-kt unit. It's a biomass gasification unit using its own fluid bed technology. And the third one will be Goldwind's two big plants, each with 250-kt capacity. One is using fixed bed and the other is using airflow bed technology.
Another notable thing is that we are expecting active trade or bunkering activities to take off in Singapore very soon. The Singapore Maritime and Port Authority, MPA, they have closed the first round of methanol bunkering license application by the end of May. Over 20 companies, they submitted applications, and the results are expected to be released in a month period by late June. There will be four to five licenses to be released for the first round. And so, we are expecting Singapore Port to kick off biomethanol trial bunkering likely from July. And the first batch of 5,000 tons of biomethanol will be loaded at Tianjin Port in North China, and transported to Singapore for trial bunkering activity.
Cassidy: Great information there, Becky. Thank you so much for sharing. It looks like we have a couple different areas to keep our eyes on for the rest of the year. And I know that you'll keep everybody posted on those units that will go up. It does sound undersupplied right now, but it sounds like there's a lot of potential to add some significant volume by the end of the year, which I think would be helpful for, you know, regulatory initiatives and people attempting to buy. So, that's great to hear.
What do you think is kind of the hurdle? I know, you know, we have highlighted these couple units, and you talked about ongoing discussions for offtake agreements. Obviously, you said high-cost concerns. Any other concerns that you feel like might be kind of holding up any of the process to start building or start, you know, getting the FID in place to build more units?
Becky: I think the key hurdles for the industry right now is mainly technology and cost. Yeah. But we believe technology breakthrough is just a matter of time. And there are also various pathways of making green methanol. So, technology is a hurdle in the initial period, but it can be conquered eventually. But cost is still a key issue or key concern. And maybe for hydrogen, green hydrogen, we still see some downsides in green hydrogen cost or prices because we are still expanding the green power capacities, which will weigh down the prices eventually. But there is limitation of biomass supply. And with more projects coming up, we are seeing more increasingly fierce competition for biomass resources. So, these will eventually determine the bottom-line cost of making biomethanol, and limit its production scale. Yeah.
Cassidy: I think that's kind of a global theme. I think you nailed technology, cost, and stock availability. It sounds like that's not necessarily unique to Asia or China. There are similar concerns over those, you know, top three things in Europe, and North America, and South America as well. All right. So, we talked about there are some volumes moving, which is great to hear. How is Argus assessing this emerging market?
Becky: For Argus, we are very happy to announce that we have launched our first Asia RED biomethanol assessed prices on 23rd of May. So, the first three prices we are assessing right now, one is the FOB North China. It's export price for the biomethanol product loading at main ports in North China. Because North China concentrated over 80% of China's announced projects. The region has a vast renewable electricity capacity, solar, wind power, and it is also a home to large swaths of agriculture land. So, this region is gradually developing into a key biomethanol production hub in China. And the region also has a few big exporting ports with ample facilities for methanol storage and exports. So, shipowners and bunker supplies around the world can use this FOB North China price assessment to gauge the production costs from China and seek arbitrage opportunities as well. Yeah.
The other two prices we have launched, one is the DAP East China, which is delivered at port prices for the RED biomethanol products arriving at main ports in East China. And the other one is DOB East China. It's delivered on board prices for the biomethanol products bunkered to the methanol-fueled vessels at main ports in East China.
So, in East China, we have the world's largest container port, which is the Shanghai Port. Yeah. And because a lot of methanol-fueled vessels are container ships, I think 60% of the new orders are for container ships. So, East China, Shanghai Port as the largest container port in the world, it has the facilities, and it has the fundamental to attract the bunkering of the methanol-fueled. Shanghai Port was also the first port in the world to have a 12,000-ton dedicated methanol barge, which is the largest in the world as well. Yeah. So, the DOB East China prices capture the spot bunkering transactions at Shanghai Port. This will give shipowners and bunker suppliers a means to evaluate the cost of bunkering biomethanol at the world's largest container terminal, which is also the closest location to production hub. Yeah.
So, all these prices are assessed through market surveys of the physical activities in the biomethanol market. So, the assessments are purely based on market discussions, extra dues, bids and offers, and are backed up by market fundamentals and other price-related information. Yeah. And our prices, our purpose of these new assessment is to bring transparency to this emerging market, enabling industry players to check price change, keep pace with the changing market. And these new prices will also allow shipowners to compare biomethanol cost with other traditional or alternative low-emission fuels in different locations to optimize their fuel mixture to meet their decarbonization goals set by EU and IMO. Not only that, but these prices are also essential reference for the investors in China and the rest of the world for evaluating ROI of their project. Yeah.
Cassidy: I want to ask a little bit more about the methodology. You did dive into it a little bit, but high level, all these bids and offers that are surveyed through the market for this market assessment or for these three market assessments, those are all ISCC-certified RED-compliant. Is there any other kind of checks that need to be made to make sure that the methanol qualifies for this assessment?
Becky: Yeah. You're right. The assessments are all referring to the RED-compliant biomethanol, which must be accompanied by RED-compliant certificate such as ISCC EU. And it must meet the minimum greenhouse gas saving requirements, which is 65% reduction against the comparison of 94-gram CO2 per megajoule.
Cassidy: Okay. Great. So, it sounds like all those volumes, certified compliant to go anywhere in the world, including Europe, where we currently have, you know, the most regulatory initiatives currently in 2025. What does the future really look like for not only biomethanol, but e-methanol or hybrid methanol in China? Are there any policy implications there? Are there other low-carbon fuel competitors, you know, kind of entering the marine fuel industry?
Becky: The demand for bio or E as marine fuel is definitely growing as there are more methanol-capable vessels, ships are delivered or about to be delivered. So, a lot of shipowners, they want to try out different green fuels. Some just want to build their image, corporate image or brand or others, they want to reduce taxes they pay on a voyage to Europe. Some shipowners, they would opt for B24, B30 LNG in the near term to comply with mandates, and they do not urgently need biomethanol. So, yeah, we do expect the volume in initial period to be limited, but it's still worth making a complete preparation along the supply chain because bio or e-methanol will become a medium to longer term low GHG saving fuels when IMO regulations is implemented.
And more importantly, I think e-methanol gain more attractions really against bio because there are potential rewards for zero or net zero fuels with CI below 19. Yeah. But the detailed guidelines will only be released, I think, in this autumn by IMO. So, this will be a big incentive for shipowners to choose e-methanol or net zero, zero fuels with low CI. Yeah. So, e-methanol is definitely more attractive in the coming or in the longer future.
Cassidy: That makes total sense from a carbon intensity standpoint, but it's encouraging to see, you know, these volumes really starting to move and this market really starting to open up because, as you mentioned, you know, you have to start somewhere and, you know, it's okay to start with some smaller volumes now. And hopefully, you know, the hurdles get eliminated and there becomes, like, a smooth process for everything with, you know, production, bunkering, things like that. So that by 2030 and 2035, when substantial volumes are needed to meet decarbonization, it's available and the process is vetted. Yeah. I think it's important to think, you know, long term, and I think a lot of maritime folks do. So good to see kind of taking steps and strides towards what will be needed in 2030, 2035 and beyond.
Becky: I agree.
Cassidy: Thanks, Becky. Any final thoughts from you before we wrap up?
Becky: I want to specify one thing for our new assessments. So, the GHG saving in our DAP East China and DOB East China biomethanol assessments are set based on the standard minimum of 65% of GHG savings based on the comparative 94-gram CO2 equivalent per megajoule. But our FOB North China assessment is set slightly higher at a minimum 70% of GHG saving to allow for the additional GHG emissions during logistic transportations to other countries. Yeah.
And another different thing is the cargo size for North China export cargoes is set slightly higher for 3,000 to 10,000 tons per lot, while the East China cargo size, because that's mainly for bunkering purpose, so, the bunkering size, trade size is set in the range of 1,000 to 5,000 tons, slightly lower than the North China exports. Yeah. So, these are the two differences between the new assessments.
Cassidy: Thanks for clarifying. And how can people reach you if they have questions about any of this information, including the new price assessments?
Becky: Welcome any questions to send to my email box, becky.zhang@argusmedia.com. Yeah. I would be very happy to answer your questions. Thank you.
Cassidy: Thank you, Becky, so much for joining us and for all this very insightful information. This series is a presentation of Argus Media, a leader in market reporting and commodity pricing information. For more details on all things methanol, visit argusmedia.com/methanol.
