Qi Wenjun, JLC 

China's methanol industry chain performed well in the first half of 2021, seeing almost all products’ prices went up YoY by various degrees. Some products hit 3-year highs, and some had their profits improved significantly.

Methanol chain products trends in the first half of the year

China’s methanol industry chain products’ prices in 1H 2021 are shown in Table 1. 

Methanol: In the first half of 2021, the prices, after a fluctuation, soared up and then fell down, with the price center higher than past two years. On the back of the expectation of accelerated global economic recovery and the inflations in many countries triggered by monetary policies, commodity prices went up quickly, especially those of coal and natural gas, leading to a rising methanol cost, and hence the operating rate decrease or temporary shut-down. Meanwhile, the market was also driven by the import reduction and the launchings of new plants. 

Formaldehyde: In the first half of 2021, China's formaldehyde market rose high and then fell back, obviously following the trend of raw materials. From January to early May, the domestic formaldehyde market was fluctuating and heading up; while from late May to June, the market gradually weakened due to the environmental protection monitoring, bearish methanol and traditional off-season in the downstream. 

Dimethyl ether: The first half of 2021 saw the whole market fluctuating high and then decreasing, as influenced by the prices of liquefied gas and the starting up of some plants.

Acetic acid: There was a significant surge in the first half of 2021, making a new record high since 2018. With the easing of the COVID-19 at home and abroad, overseas acetic acid demand was recovering, driving China’s acetic acid exports. Meanwhile, the tightness of acetic acid supply and new downstream capacities pushed up the prices of acetic acid further higher.

MTBE: With the easing of COVID-19 in China, the overall demand for gasoline became bigger than that in 2020, and the demand for MTBE from oil blending was accordingly increasing. The crude oil futures boosted the market sentiments, which also supported the MTBE prices. 

DMF: The market fluctuated frequently in the first half of 2021, with the biggest price gap reaching RMB4 600/ton. Those several large rises were mostly because of the shortness of the domestic supply on the back of exports of mainstream producers. Meanwhile, domestic demand remained flat. The market became stable in June. 

Dimethyl carbonate (DMC): In the first half of 2021, under the impact of the commissioning of large capacities, changes in supply and demand, and the low-prices products from new routes, China’s DMC was fluctuating at a wide band. 

Propylene: The market was on a reversed "U" trend in the first half of 2021, with the price center significantly higher than that in 2020. Due to the increasing raw materials, propylene plants were under cost pressure, and such cost side support restricted the decline, leaving the late June propylene market at a stalemate.

Polypropylene: The first half of 2021 saw the market went up and then down, and some months witnessed both ups and downs. The volatility of the polypropylene market was relatively small before the Chinese New Year, while, after the festival, the prices were pushed up as spots traders and downstream plants started purchasing.

New capacities in the whole industry chain

Table 2 shows the commissioning of new capacities in the whole methanol chain in China in 2021. There are about 8.28 million t/a methanol to be put into operation in China in 2021, and the launching of some large projects are concentrated in the first half of the year, including Yanchang China Coal Phase II, Shandong Shengfa, Jiujiang Xinlianxin, Xinjiang Zongtai Coal Coking, China Coal Ordos Energizing, Shanghai Huayi (Guangxi), etc.

By the end of June, a total of 4.37 million t/a of capacities have been put into operation, with the ratio of commissioning at 53%. The launchings will be concentrated in Northwest China in the second half of the year, including Jiutai (Tuo County)’s 2 million t/a methanol plant. Henan Yanhua and Anyang Shuncheng will commission their lines at the end of the year. And there is also a possibility that some capacities will be launched in early 2022.

     In terms of methanol downstream products, a total of 4.7 million t/a capacities, covering acetic acid, dimethyl ether, MTBE, formaldehyde and olefin are planned to be put into operation. By the end of June, only 1.1 million t/a capacities were launched, taking only 23% of the total, namely Guangxi Huayi’s 500 000 t/a acetic acid, Jiangxi Jiujiang Xinlianxin Phase I’s 200 000 t/a of dimethyl ether, Zhongke Refinery’s 200 000 t/a of MTBE and Guangxi Laibin Fulong’s 200 000 t/a of formaldehyde. More downstream capacities will be launched in the second half of the year, especially formaldehyde. For instance, Shandong Lianyi’s 2 million t/a formaldehyde will be put into production then. The new capacities are large.  However, with the elimination of old plants, the net growth in capacity is limited.