Emerging Downstream Demand Propped up China's Methanol Market in 2011   

By Yang Weilan and Li Zejiang, Consulting Business Unit of China National Chemical Information Center

1  Capacity and output of methanol grew rapidly

In 2011, despite complex domestic and international economic situations, the capacity and output of methanol in China still grew substantially. As of the end of 2011, the number of methanol producers in China had exceeded 300, with a total methanol capacity of 47 million t/a, up 22.4% year on year (yoy). In the first ten months of 2011, the methanol output of large and medium-sized methanol producers amounted to 16.7508 million tons. In the whole year of 2011, it is expected to reach 22 million tons, up 25.6% yoy; and the annual operating rate of the industry (including invalid capacity) was 46.8%. Thus, the industry's overcapacity was still serious.

2  The rapid development of emerging downstream applications led to a substantial increase in methanol consumption
In 2011, emerging downstream applications of methanol, such as methanol to olefins (MTO) and alcohol ether fuel, developed rapidly, boosting the demand for methanol. The apparent consumption of methanol in China in 2011 is expected to reach 27.6 million tons, up 21.6% yoy.
    Methanol to olefins (MTO): In 2011, four large MTO projects in China were put into commercial operation or trial operation. They are Shenhua Baotou 600 000 t/a CTO (coal-to-olefins) project (which first turns coal into methanol and then converts methanol into olefins), Shenhua Ningmei 500 000 t/a coal-based MTP (methanol-to-propylene) project (which first turns coal into methanol and then converts methanol into propylene), Datang Duolun 500 000 t/a coal-based MTP project, and Sinopec Zhongyuan Petrochemical Co Ltd's 600 000 t/a MTO project (which uses imported methanol as the feedstock).
    Alcohol ether fuel: Because international oil prices soar and domestic gasoline consumption increases substantially, methanol gasoline, methanol fuel, dimethyl ether (DME) and other new types of fuel have become new drivers for the growth of methanol consumption. It is estimated that the consumption of methanol by alcohol ether fuel, such as methanol gasoline, in 2011 grew 100% compared to 2010.

3  Imports created a record high
In the first 11 months of 2011, China's total import volume of methanol reached 5.2433 million tons, and the top five sources for the imports were: Iran (accounting for 40.9% of the total import), Oman (16.6%), Saudi Arabia (16.1%), Qatar (7.4%) and Malaysia (5.8%). In the whole year of 2011, the total import volume is expected to reach 5.64 million tons, up about 8.8% yoy. In the first 11 months, China's export volume of methanol totaled 43 500 tons.

4  Emerging downstream applications propped up methanol prices in 2011

Propped by the demand from CTO and alcohol ether fuel areas, methanol prices in China did not have sharp ups or downs in 2011 as did in 2010. In the first half of 2011, the prices basically fluctuated around the initial prices of the year. From late June to early October, driven by the alcohol ether market, the prices went up in fluctuation. By early September, the prices reached the highest levels of the year. In mid-October, the prices began to go downward. By the end of December, the prices fell below the initial levels of the year. Overall, the methanol prices in China were RMB300 /t higher in 2011 than in 2010. Figure 1 shows methanol price movements in major regions of China in 2010 and 2011.

5  Industrial restructuring is imperative
China's methanol industry now faces the following situations. First, its capacity is significant excess. Second, its industrial structure is irrational: despite tight natural gas supply and anthracite price hikes, the methanol capacity using natural gas and anthracite as raw materials still accounts for a high proportion in China; industry concentration is low, and some methanol plants are too small; and most of new methanol plants are located in northwestern and northern China, while the consumer markets are mainly distributed in eastern and southern China. The separation of production and consumption leads to a high transport cost to methanol. Third, in other countries, especially in Middle East countries, methanol is generally made from natural gas or oilfield associated gas and has advantages in scale and price and thus has significant market competitiveness, so the situation that China imports a large amount of methanol from abroad will exist for a long term. Fourth, the pressure for energy conservation, emission reduction and environmental management is huge, but methanol producers' self-transformation ability is weak. And finally, methanol producers' technological innovation ability is not strong.
   The Twelfth Five-Year Plan for Methanol Industry clearly states that during the Twelfth Five-Year Plan period (2011-2015), according to the intensive and circular economy development model, China's methanol industry should accelerate the transformation of its development pattern, increase its industry concentration and optimize its industrial layout and product mix. By 2015, China's total methanol production capacity should be controlled below 50 million t/a; the number of methanol producers should be controlled less than 150; twenty large methanol enterprise groups with the core competitiveness should be formed; the proportion that large methanol enterprises account for in the national total methanol capacity should be raised to more than 75%; and in the national total methanol capacity, the proportion of methanol capacity using pressurized continuous gasification technology should be enhanced from 24% currently to 50%, the proportion of methanol capacity using anthracite as the raw material should drop from 37.8% currently to 20%, the proportion of methanol capacity using natural gas as the raw materials should fall from 28.6% currently to 15%, and the proportion of methanol capacity using coke oven gas as the raw material should be raised from 10% currently to 15%.
   At the same time, enterprises will be encouraged to adopt clean coal gasification technology, multi-generation technology and other advanced, practical and energy-saving technologies to reduce the overall energy consumption and pollutant emissions of methanol production. Enterprises will be encouraged to develop new chemical materials, fine chemicals, new energy and other downstream industries to extend their industrial chains, to enhance the on-site utilization rate of methanol and their competitiveness and to promote the overall technological level of China's methanol industry to reach or approach the international advanced level.