World Methanol Conference signals slowing demand

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World Methanol Conference Signals Slowing Demand Author/Source: China Chemical Industry News Date: 10-12-2018 Clicks: 38 Against the backdrop of increasing complexity in the methanol industry and sharp fluctuations in international methanol prices, IHS Markit’s 36th World Methanol Conference was held on October 6 in Vienna, Austria. The meeting noted that the operating status of China’s large-scale methanol-to-olefins (MTO) plants is a key factor behind the sharp fluctuations in methanol prices, while the development of methanol feedstocks such as coal in China and shale gas in the United States has added complexity to supply chains. The slowdown in future methanol demand will affect some new projects. 　　Slowing demand in China In recent years, China’s MTO plants have been the main driver of growth in methanol demand. Mike Nash, vice president of syngas chemicals at IHS Markit, said that as gasoline specifications in China change, the growth in methanol demand is expected to slow down over the next 5 years. 　　In August this year, China’s State Council stated that it would advance the plan announced by the Energy Bureau in 2016 – to introduce ethanol gasoline (E10, which contains 10% fuel ethanol in gasoline) nationwide by 2020 – as part of a broader effort to tighten environmental regulations. A 10-year trial period for this initiative will begin this year in 15 provinces across China. Mike Nash believes that the implementation of this policy will certainly reduce the amount of methanol and methyl tert-butyl ether used in gasoline blending in China, posing a threat to the demand for methanol. According to IHS Markit statistics, China currently uses about 5 million tons per year of methanol in gasoline. 　　IHS Markit has also reduced its forecasts for the demand for methanol from MTO plants; by 2023, MTO’s demand for methanol is expected to account for 15% of the world’s total methanol demand of 96.7 million tons, compared to a previous estimate that MTO would account for 20% of total methanol demand by 2021. 　　Mike Nash said that the development of other applications in the coming years could drive growth in demand for methanol, including its use as fuel for marine vessels; the International Maritime Organization plans to reduce the sulfur content in ship fuel by 2020. China’s strict environmental protection policies also support the use of methanol as a substitute for coal in industrial steam boilers, thereby reducing emissions of sulfur dioxide and nitrogen dioxide. Switching the fuel for industrial boilers could lead to an increase in China’s methanol consumption of around 2 million tons per year. 　　However, the operating rate of MTO plants in China may decline between 2022 and 2024. The slowdown in the growth of methanol demand will have some impact on the global methanol market over the next 5 years. Mike Nash said that as a result, the deployment of new methanol production capacity being built in Iran and North America may also slow down, especially those facilities intended to meet China’s demand. 　　Delay in North American projects Marc Alvarado, deputy director of methanol for IHS Markit’s Americas region, said that methanol production capacity in North America is expected to rise from nearly 6.9 million tons per year in 2018 to around 11 million tons per year by 2023. These figures take into account the possible delays in the commissioning of some projects. This includes Yu Huang Chemical’s 1.7 million tons per year methanol plant in St. James, Louisiana, whose commissioning date may be delayed from the end of 2019 to mid-2021. There is also the 1.4 million tons per year fuel plant located in Lake Charles, Louisiana, which is expected to come online in 2023, rather than in 2021 as originally planned. 　　IHS Markit predicts that driven by construction and fuel applications, North American methanol demand will grow at an average annual rate of 2.3% over the next 10 years. However, based on the project information disclosed by various companies, the annual production capacity of methanol in this region is expected to grow by 7.2% during the same period, far exceeding demand growth; as a result, North America will become a net exporter of methanol in 2021–2022. However, the US-China trade war could lead to a shift in trade flows, posing a certain threat to some export-oriented methanol projects in the United States. 　　Production disruptions in Iran The U.S. trade policies will also have a significant impact on Iran’s methanol production capacity. U.S. sanctions on Iran will take effect in November, which will affect Iran’s methanol production, as factory utilization rates will surely decline amid falling demand. Furthermore, due to U.S. sanctions, the withdrawal of energy exploration companies from various countries as well as Iranian engineering and technology providers will also reduce the country’s potential for increasing its methanol production capacity. Meanwhile, shipping companies may find it difficult to obtain marine insurance for operating ships inside and outside Iran, thereby weakening Iran’s ability to export methanol. 　　IHS Markit states that China is Iran’s largest importer of methanol, accounting for 68% of Iran’s exports in 2017, and this proportion is not expected to change significantly. The implementation of China’s E10 fuel policy has led IHS Markit to adopt a more cautious stance regarding an increase in Iran’s production capacity. Iran’s current methanol production capacity is around 5 million tons per year, with another 3 methanol plants having a total capacity of 4 million tons per year set to come online soon. Some of the new production capacity was initially expected to come online in 2018, while the remaining capacity will be brought online between 2019 and 2020.