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Yuhuang Chemical, Koch Methanol enter into methanol offtake agreement

Houston — Yuhuang Chemical, a wholly owned subsidiary of Shandong Yuhuang Chemical Company, Ltd., has entered into an offtake agreement with Koch Methanol for the supply of methanol from its St. James Parish, Louisiana facility, the company said.

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"As part of its investment, affiliates of Koch Methanol will receive the exclusive methanol offtake rights from the new facility, as well as construct, own, and operate the methanol terminal assets for the outbound flow of methanol via marine, rail, and truck logistics," the statement said Thursday.

The 1.7 million mt methanol facility in St. James Parish is currently under construction. The project broke ground in January 2017 and is estimated to cost $1.85 billion. Commercial production from the facility is expected to begin in mid-2020, the company said.

"The decision by Koch Methanol to invest in YCI Methanol sends a clear signal to the industry about the strength of this facility," YCI CEO Charlie Yao said in the statement.

"Our relationship with YCI will allow Koch Methanol to continue providing our customers with a consistent and low-cost supply of IMPCA quality methanol, both in the US and in foreign markets, for years to come," Jim Sorlie, senior vice president with Koch Methanol, said in the statement.

Upon completion, the facility would rank as the second-largest methanol production plant in the US, behind the 1.75 million mt/year Natgasoline facility in Beaumont, Texas.

"To the fundamentals in the US, I'm not too worried of Natgasoline and Yuhuang, as US economic growth is strong regionally, it will be balanced. In the short term, it will compete and sell to Asia," a source said.

US methanol production capacity started 2015 at 2.25 million/mt year and rose to 5.75 million mt/year by the beginning of 2016. By end-June 2018, capacity grew to to 7.5 million mt/year. The addition of St. James parish would bring US capacity to 9.2 million mt/year.

The production expansion continues to propel US exports to historic highs while chopping away at imports. The wave of US shipments has begun to compete in export markets with material from Trinidad and Tobago and Venezuela, which have also lost market share in the US.

US methanol exports rose to their highest level recorded in June as imports hit two-year lows, according to the most recent federal trade data.

US methanol exports reached 199,086 mt in June, up 69% from 117,475 mt in May and 79% higher than the 111,181 mt from June 2017, US International Trade Commission figures showed. The export total marked the highest since 191,499 mt in October 2017, according to the data.

South Korea marked the largest export destination with 188,277 mt. Mexico received 8,103 mt, followed by China with 1,404 mt.

Year-to-date exports stand at 910,280 mt, nearly one-third more than the 658,698 mt from January-June 2017, the data showed.

Trinidad & Tobago maintained its position as top importer into the US with 63,214 mt, even with methanol production reaching multi-month lows there in June.

Year-to-date imports stand at 1.66 million mt, down 50% from 3.31 million mt in January-June 2017, the data showed.

Platts assessed US spot methanol on Thursday at 115.25-115.75 cents/gal FOB USG for August and 114.75-115.25 cents/gal FOB USG September.

--Daria Campbell, daria.campbell@spglobal.com

--Edited by Derek Sands, derek.sands@spglobal.com