China’s methanol industry urgently needs to seize opportunities in times of crisis

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The domestic methanol industry needs to seize opportunities in times of crisis. Author/Source: Sinochem New Network Date: April 10, 2020 Clicks: 6 Market prices have dropped sharply, and the technological standards vary. Due to the global spread of the pandemic, as well as factors such as energy conflicts and financial struggles, domestic methanol prices have fallen significantly recently. Compared to the beginning of the year, by the end of March, methanol prices in East China and North China had dropped by 550 yuan per ton; prices in the Northwest region dropped by more than 300 yuan. Prices in all these regions were hovering below cost levels. At the recent meeting on the analysis of China’s methanol market under the new circumstances, experts present suggested that different types of methanol production facilities should be treated differently. While phasing out outdated production capacity, a number of enterprises should be upgraded using the new energy and chemical integration system technology, in order to reduce both the cost of methanol production and energy consumption. 　　According to Zhang Erhong, general manager of Methanol Era Alliance (Beijing) Technology Co., Ltd., there is currently a severe situation of inverted costs and prices for methanol in China. Taking Inner Mongolia as an example, the production cost of methanol for local large enterprises is between 1,400 and 1,500 yuan; the transportation cost to southern Shandong is over 240 yuan, resulting in a total cost of more than 1,700 yuan. In the Lunan market, the price of methanol is only 1,570 yuan, resulting in a loss of at least 130 yuan per ton of methanol. Based on a company producing 2,000 tons of methanol per day, it would incur a loss of 260,000 yuan per day. 　　Zhang Erhong analyzed that there are mainly three reasons for the inversion of methanol costs and prices. First, the resumption of operations in upstream and downstream sectors is not coordinated, leading to an imbalance between supply and demand. Enterprises in the downstream sector of methanol, such as those producing formaldehyde, dimethyl ether, and methanol fuel, are mostly small-scale businesses; due to constraints such as funding and labor shortages, their resumption of operations is slow. Furthermore, as the domestic epidemic prevention and control measures have not yet been fully lifted, most businesses in the hospitality sector such as inns, hotels, and restaurants are still under regulatory controls, which affects the demand for formaldehyde, methanol-based fuels, and dimethyl ether. Secondly, the decline in international oil prices has led to a significant drop in the prices of olefins and refined petroleum products. Currently, methanol used in the production of olefins accounts for about one-third of the total demand for methanol; therefore, olefin prices have a significant impact on methanol prices. At the same time, lower gasoline prices and reduced demand also affect the demand for MTBE and methanol-based fuels. Third, methanol inventories are high. According to statistics, the current methanol inventory at coastal ports is around 1.1 million tons, of which 600,000 tons are stored in ports in Jiangsu. 　　The experts present also noted that the current level of technology in methanol production facilities in China varies widely, which in turn affects the healthy development of the industry. 　　According to statistics, compared to 2009, the capacity of methanol production facilities in China has increased from 27.22 million tons per year to 88.38 million tons per year, while the maximum capacity of a single coal-based methanol production unit has risen from 600,000 tons per year to 1.8 million tons per year. However, the level of methanol production equipment remains uneven; in 2019, the share of production capacity from existing methanol production processes using various raw materials such as natural gas, coke oven gas, and coal was 11.3%, 15.9%, and 72.8% respectively. 　　Experts say that, based on the current situation, most of the 26 natural gas-based methanol production units use equipment from abroad dating back to the 1990s; such equipment has high energy consumption and is not suitable for China’s conditions of limited gas resources. It is recommended to phase out those units with lower production capacity. The coke oven gas method is in line with current policies aimed at reducing energy consumption and emissions, but from a broader and long-term perspective, coke production generates significant pollution; therefore, it is suggested to phase out or upgrade some of these units. The coal-based methanol production process is even more diverse, with varying levels of efficiency, and it is recommended to eliminate those coal-based methanol units that have high energy consumption and an annual production capacity of less than 200,000 tons. 　　“Methanol can replace a portion of imported oil and enhance China’s energy security; therefore, while phasing out outdated production capacities, it is also necessary to pursue innovative development by using new energy-chemical integration technologies to transform certain enterprises, thereby reducing both the cost of methanol and energy consumption. At the same time, to advance the use of methanol as a fuel, it is necessary to develop and strengthen a number of large-scale enterprises that integrate production, research, and education. Efforts should be made to improve the efficiency, intelligence, and environmental friendliness of equipment used for methanol applications, replacing traditional coal-fired boilers with efficient and intelligent methanol boilers, heating systems, and hot air generators in order to reduce air pollution. ”Zhang Erhong emphasized.