Methanol Market in China in 2015

By Li Min, China National Chemical Economic and Technical Development Centre

Supply

The growth of methanol capacity in China slowed down in 2015, reaching 76.3 million t/a by year end; 7.4 million t/a was added (including 3.7 million t/a for which wet commissioning had started at the end of 2014), an increase of 10.7% over 2014. As 1.8 million t/a of the new capacity was matched with olefin units, the new methanol capacity that could be used to supply the open market was only 5.6 million t/a. Data from the National Bureau of Statistics show that China’s 2015 output of methanol was 40.1 million tons, an increase of 8.3% over the previous year. Table 1 shows the major methanol producers in China in 2015.
It is expected that less new capacity will be added in 2016. New capacity will be concentrated mostly in major coal producing provinces such as Shanxi, Shaanxi and Inner Mongolia. New capacity in Shanxi will consist mainly of small units based on coke oven gas. New capacity in Inner Mongolia and Shaanxi will consist mainly of large units based on coal, and their production cost will be relatively low.
New and expansion methanol projects completed in 2014 are all specifically matched with downstream olefin production capacity; examples are a 1.5 million t/a coal-based methanol unit of Ningxia Baofeng Energy Group Co., Ltd., a 1.8 million t/a coal-based methanol unit of Yanchang China Coal Yulin Energy and Chemical Co., Ltd., a 1.8 million t/a coal-based methanol unit of China Coal Yulin Energy and Chemical Co., Ltd. and a 1.8 million t/a coal-based methanol unit of Shaanxi Pucheng Clean Energy Co., Ltd. These firms’ major development orientation is an industrial chain with high added value. Quite a few coal-to-olefin integrated projects have started production or commenced construction. According to statistics, integrated coal-to-olefin units will account for around 60% of the new methanol capacity constructed in 2015. Table 2 shows the future expansion of methanol capacity.

Demand

The apparent consumption of methanol in China was 45.48 million tons in 2015, an increase of 12% over the previous year. Figure 1 shows the methanol downstream consumption structure in China.
Downstream application sectors of methanol in China mainly include formaldehyde, dimethyl ether, acetic acid, methanol gasoline, methanol-based olefins, MTBE and chloromethane.
Formaldehyde: Formaldehyde is mainly used in organic synthesis, synthetic materials, coatings, rubbers and pesticides. Its major derivatives include paraformaldehyde, polyformaldehyde, phenolic resins, urea resins, amino resins, urotropine and polyols. The artificial board industry in China is advanced and generates considerable demand for formaldehyde. The developing textile industry and construction materials industry have also promoted growth of methanol consumption.
Dimethyl ether: According to incomplete statistics, dimethyl ether capacity in China amounts to around 13.0 million t/a. More than 90% of dimethyl ether is blended with LPG for combustion. The growth of LPG demand is limited, so growth of demand for dimethyl ether in blending with LPG is also obviously limited. The growth of methanol consumption in making dimethyl ether is therefore rather slow.
Acetic acid: China’s output of glacial acetic acid is estimated to have reached 6.0 million tons in 2015. Demand for its downstream products such as vinyl acetate, terephthalic acid and acetic esters increased considerably in 2015.
Methanol gasoline: Through developments made in recent years, methanol gasoline has become a methanol application with rapid growth in China. Capacity of around 0.70 million t/a is already in place today. Quite a few methanol-based gasoline projects are under construction or planned for construction. It is expected that the capacity to make methanol-based gasoline will reach 5.0 million t/a in 2020. The dissemination and use of methanol gasoline has already been launched to different degrees in nearly 30 provinces, autonomous regions and direct-controlled municipalities of China.
Methanol-based olefins: With the completion of methanol-based olefin units of Ningbo Fund Energy Co., Ltd. (formerly Ningbo Skyford Chemical Co., Ltd.) and Wison (Nanjing) Clean Energy Co., Ltd., six coal (methanol) based olefin units with a combined capacity of 2.76 million t/a have been put into operation in China. It is expected that the capacity to make coal (methanol) based olefins in China will reach 23.0 million t/a in 2018.
Coal-to-olefin has been a hot trend in the chemical industry in recent years. Five plants with a combined olefin capacity of 1.19 million t/a – completed by Shandong Huabin Group, Ruichang Chemical Co., Ltd., Lushenfa Chemical Co., Ltd., Shenyang Chemical Co., Ltd. and Zhejiang Xingxing New Energy Technology Co., Ltd. – started production in 2015. Table 3 shows the production/sales balance of methanol in China in recent years.

Table 1    Major methanol producers in China, 2015

Producer    Capacity (million t/a)
Shenhua Ningxia Coal Industry Group Co., Ltd.    2.49
Henan Coal Chemical Industry Group Co., Ltd.    2.20
Kingboard Chemical Holdings Ltd.    2.15
Jiutai Group    2.00
Shenhua Baotou Coal Chemical Industry Co., Ltd.    1.80
Datang International Power Generation Co., Ltd.    1.68
Shanghai Coking Co., Ltd.    1.40
CNOOC Kingboard Chemical Co., Ltd.    1.40
Yankuang Group    1.38
Inner Mongolia Yuanxing Energy Co., Ltd.    1.35
Xinjiang Guanghui New Energy Co., Ltd.    1.20
Huadian Yulin Natural Gas Chemical Industry Co., Ltd.    1.10
Inner Mongolia Boyuan United Chemical Co., Ltd.    1.00
Total    21.15


Table 2    Future expansion of the methanol capacity

Company    New capacity (million t/a)    Location    Expected startup time
Zhong’an United Coal Chemical Co., Ltd.    1.70    Huainan, Anhui    2016
Hengyou Energy Chemical Technology Co., Ltd.    0.60    Changji, Xinjiang    2017
Hebei Great Flow Investment Group Co., Ltd.    1.00    Inner Mongolia    2017
Zhongtian Hechuang Energy Co., Ltd.    3.60    Ordos    2017
Total    6.90    -    -



Import and export

China imported 5.54 million tons of methanol in 2015, an increase of 27.8% over the previous year, and worth US$1 562.17 million, a drop of 3.2%. The export volume was 0.16 million tons, a drop of 78.3% from the previous year. The export value was US$49.89 million, a drop of 85%.
Middle Eastern countries such as Iran, Oman and Saudi Arabia were major import sources in 2015. The province importing the most volume in 2015 was Guangdong, taking over 35% of the national total. The export volume was 0.16 million tons, a drastic drop of nearly 80% from the previous year. The drop was so severe because the domestic methanol supply could not even satisfy the market demand from China’s methanol-to-olefin operators, as development in that sector is so rapid. The price of methanol imports also increased drastically.

Table 3   Production/sales balance of methanol in China   (million tons)

Year    Output    Import volume    Export volume    Apparent consumption    Self-sufficiency (%)
2015    40.11    5.54    0.16    45.48    91.2
2014    37.41    4.33    0.75    40.99    91.3
2013    28.79    4.86    0.77    32.87    87.6
2012    26.40    5.00    0.07    31.33    84.3



Market price

On the whole, the methanol market in China experienced two extremes in 2015. The price was close to its all-time low at the beginning of the year but went straight up afterward. It peaked in the middle of the year and then slid steadily until year end.
Starting from mid-January the decline in crude oil prices slowed down and they even recovered bit. Market expectations for demand from new methanol-based olefin units were sound. The methanol market recovered vigorously –spot good prices started a sustained increase, peaking in early May. Demand turned slack in May and June, the market turned weak, prices plummeted and producers’ profits were squeezed.
Inadequate demand was still the major factor affecting methanol prices. The average operating rate of dimethyl ether units in 2015 was only around 20%. The demand for formaldehyde shrank further. Only acetic acid makers maintained reliable demand. Low international crude oil prices weakened the competitiveness of coal-based olefins as an emerging downstream sector. Figure 2 shows the trend of methanol prices in East China in 2015.
Methanol producers and traders in China face greater pressures in next 3-5 years. Domestic coal-based methanol producers must cope with comparatively high production costs in next few years to endure competition from imports. China’s methanol producing areas are quite far from consuming areas, making transportation inconvenient with high freight costs. As methanol production in China uses mostly coal as raw material, considerable amounts of acidic gases and cinders are emitted, so a lot of capital has to be put into environmental protection and treatment facilities. Overall, methanol produced in China has no significant competitive advantages over methanol produced elsewhere. Impacts from importing low-cost methanol on the domestic methanol market will worsen in the next few years.