Fast forward a number of years and generators became very user friendly and almost maintenance free (assuming it was a newer unit). The reasons for this being due to atmosphere controls and air cooling both of which meant users were guaranteed stable carburizing atmospheres and very low maintenance. What we see in 2007 is most heat treaters using Endo generators with Nitrogen/Methanol trending to the minority (we will add though, that in areas without natural gas, Nitrogen/Methanol is still the first choice for obvious reasons).  

Now that we have our background lets look at a fairly recent trend or concern for users of Nitrogen/Methanol systems, rising prices and even more importantly very tight supply. Recently we have been asked by a number of captive and commercial heat treaters to quote on new Endo generators as an alternative to their Nitrogen/Methanol systems. The reason given in every case? Rising costs, but more importantly a real fear that they could potentially be unable to get supplies of Methanol. The December 2006 article below which appeared on www.Purchasing.com sums up the situation very neatly; 

“After averaging just about $2/gallon for two months, spot methanol prices have moved up to $2.25 early this month because of consistently strong demand in a market still concerned about near-term supplies. This is more bullish that buyer attitudes since only 38% of those polled in October projected higher pricing though April. “Continued strong demand and a large number of competitor outages caused an unprecedented shortage of methanol supply in the third quarter that drove spot methanol prices to record highs,” says Bruce Aitken, CEO of key supplier Methanex. He believes that planned and unplanned production outages across the industry in the third quarter caused the loss of more than one million metric tons of world methanol supply, boosting third quarter pricing by 9% worldwide—and setting the stage for continued increases this quarter. “Despite these very significant price increases, methanol demand remains strong,” Aitken says. “Global methanol inventories are at very low levels and an extended period of high operating rates is required to balance supply and demand.” International Trade Commission data shows that U.S. imports of methanol from Trinidad and Tobago, Venezuela, Canada and Argentina were down 7.3% through August from the same period last year.”

A couple of factors explain the shortages of Methanol. The first is that the supply side of the methanol industry is in transition from smaller plants in the main demand regions to new mega methanol plants in low-cost regions. Secondly there have been a number of production shutdowns due to scheduled maintenance, mechanical failures and disruptions in the supply of natural gas. This explains why some heat treaters are getting a one month supply of Methanol when they have ordered a two month supply.  

We asked Mike Stempo, Business Development and Applications Engineering at Air Liquide www.us.airliquide.com for his thoughts and this is what he told us; 

“Prices do and have always been swinging on this product, however there just might be even more reason to be concerned these days.  I can’t say if it’s just a typical swing in the market with only short term, short lived reasons (Methanex quote above) or, it could be something to pay attention to in the longer run, as one should do with any commodity.  Better to be safer than sorry though.   

Some heat treaters will either jump to endo or not convert to MeOH if they were considering it right now.  But NG and MeOH prices are somewhat interlinked as MeOH is made from NG by steam reforming and use of a catalyst.  So, in the long run, one may find that one is merely squeezing the balloon until it blows out the other end; the trick is to not get caught doing it.   It is tantamount to putting in dual fuel burner capability along, with maybe even electrics, to stave off being blocked into a corner on ones heating processes.  If MeOH prices rise too high, too quickly, or say MeOH gets curtailed for some odd reason (heat treaters are a miniscule user of this product compared to the overall industry use in other areas so they would tend to get whipsawed or cut off first) then they could switch over to endo-gas. The industry still sells N2-MEOH atmosphere systems where they still make sense for the customer in specific instances.  I can appreciate the overall economics and perceived shifts in economics of the comparison between endo-gas and MeOH systems and all the various scenarios for each given situation.  It may not make sense for some heat treat users, but it still can in some others.”   

As usual it is hard to say where we are going. Certainly we can see that prices have gone up because of supply problems, however it would appear that in the medium to long term this should not be an issue as new supplies come on stream. Incidentally as methanol is produced from Natural Gas you would expect that prices for both should rise or fall hand in hand however this is not always the case as the available supply of Methanol very much affects the price as is the case with any commodity. So what do we think? Stick with what you now have but have a good contingency plan in place.

June 2007