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The future of methanol buildout in North America is far less certain than industry forecasts suggest. While developers continue to propose millions of tons of new production capacity, global market instability, persistent project cancellations, and an underdeveloped green hydrogen supply chain raise significant questions about whether many of those projects will ever become operational.
In the last two decades, the US has leapfrogged from a minor player in the global methanol market to the world’s fourth-largest methanol exporter, with millions of metric tons of new capacity additions on the table. But in the wake of short-term disruptions and questions of long-term profitability, there are a number of reasons to question whether the slate of hulking new projects from Appalachia to Louisiana to Sinaloa, Mexico will ever be built.
The report analyzes the rapid growth in US methanol capacity, the substantial number of large projects cancelled due to market headwinds and community opposition, and the forces driving momentum for—and concerns around—new capacity additions in North America.
Key findings:
- In the last 20 years, the US has become one of the world’s largest methanol producers and exporters. Since 2005, US annual methanol capacity has leapt from a relatively tiny 785,000 metric tons to more than 13 million metric tons.
- Planned North American methanol capacity would almost double current capacity. Industry buildout, concentrated along the US Gulf Coast, is banking on bullish demand growth.
- Methanol buildout harms communities. Methanol is a toxic chemical, and its production relies on harmful gas extraction and petrochemical supply chains. These industries generate lots of harmful, climate-warming emissions and threaten the health of nearby communities.
- Many US methanol projects have been canceled due to market uncertainty and community opposition. Two-thirds of proposed methanol capacity in the last decade was shuttered, including the 7.3 million metric ton IGP Gulf Coast Methanol Complex in Plaquemines Parish, LA.
- Future North American methanol capacity growth remains uncertain. There are two major reasons to doubt that all these proposed methanol projects will be built:
- The Iran War has upended near-term assumptions around the macroeconomic trajectory of fossil fuel derivative markets. But regardless of the status of the Strait of Hormuz, the decision to build new methanol capacity will be based on long-term profitability, not to address a short-term problem. Supply gaps may be more easily filled by increasing production from under-utilized existing facilities than by constructing new ones.
- Half of proposed capacity is dependent on biomass or green hydrogen as feedstock. Today, biomass and green hydrogen supply chains are prohibitively underdeveloped.
If methanol demand—and buildout—do rise to meet the most bullish of projections, the challenges facing the green hydrogen industry mean that this growth would primarily be of a benefit to the fossil fuel industry. For communities facing polluting new projects, this would mean another setback and prolonging of the myriad negative human health and environmental impacts caused by continued gas extraction and petrochemical production and transportation.