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The overcapacity in methanol production is merely a superficial issue; in the future, methanol-to-olefins will be the main driver of demand for methanol in China. Author/Source: Date: 2017-06-12 Clicks: 28 Key points: Since 2009, China’s methanol production has been on the rise, with the increase in production exceeding that in capacity over most of these years, leading to a gradual increase in the operating rate of production facilities. During the methanol anti-dumping period, imports of methanol declined year by year; after the end of the anti-dumping measures, import volumes rebounded significantly. China has enormous potential for methanol demand, with downstream consumption growing for 10 consecutive years. However, the competitiveness of methanol in our country still lags significantly behind that of foreign methanol. As ammonia synthesis plants build methanol production facilities, the competitiveness of methanol in our country is expected to improve in the future. Currently, the use of methanol in olefin production is growing the fastest; it has become the largest end-use sector for methanol, and it will remain the main driver of demand for methanol in China in the future. The 2017 China·Zhengzhou Methanol Industry Summit Forum, hosted by Guoliu Futures and Methanol Network, was held in Zhengzhou on the afternoon of June 10. Wei Yong, vice president of the Methanol Branch of the China Nitrogen Fertilizer Association, said that for a long time, the market has generally believed in a paradox of \"excess production capacity coupled with annual increases in production\" for methanol, but this is not the case. The capacity of methanol production in our country that is actually in use can be divided into two categories: the capacity of plants that are operating, and the capacity of plants that have been shut down for a long time. Among them, the capacity of a device in operation represents its capacity during two consecutive years of operation, while the capacity of a device that has been shut down represents its capacity over the past two years since it stopped operating. Based on historical data, first of all, in China, the production capacity of methanol that has been shut down for two consecutive years consists mainly of enterprises with small scale, an unreasonable raw material structure, and poor competitiveness; therefore, the possibility of these enterprises resuming operations is very low ； Secondly, after removing the production capacity that has been shut down for two consecutive years, China’s methanol production capacity amounts to 67.12 million tons, which gives a utilization rate of 78.6% ； Third, among the productive capacity, the capacity for producing methanol from natural gas and coke oven gas, as well as for co-produccing methanol and ethanol, amounts to 27 million tons. The operating rate of this capacity is less than 70% throughout the year, with at least 20% of it being ineffective capacity. After removing this ineffective capacity, China’s actual effective methanol production capacity is 61.72 million tons, with an operating rate of 85.5%. Therefore, the current overcapacity in methanol production in our country is merely a superficial phenomenon, with the actual utilization rate of production capacity remaining at a normal level. Wei Yong said that compared to foreign countries, China’s methanol industry is at a relative disadvantage in terms of competitiveness. In terms of production scale, there is a significant gap between China’s natural gas-based methanol plants and those abroad. Coal-based methanol plants in China are among the largest in the world, while methanol plants that use coke oven gas have smaller scales due to the limitations imposed by the scale of coke production. In terms of raw material sources and production processes, methanol production abroad relies mainly on natural gas, while in China coal is the primary source. The natural gas-based methanol production process is simple, has a short workflow, requires less space, involves lower investment costs, and allows for larger-scale installations; it is also considered a clean production method with low emissions of waste. In contrast, the coal-based methanol production process is complex, has a longer workflow, requires more space, involves intricate operation and management, demands high investment costs, results in high levels of waste emission, and poses significant environmental challenges. Therefore, natural gas-based methanol production is superior to coal-based methanol production. From the perspective of sales costs in target markets, the sales cost of methanol in foreign target markets ranges from 1,085 to 1,806 yuan per ton, whereas it is between 2,181 and 2,449 yuan per ton in domestic target markets; thus, methanol is more competitive abroad than domestically. Wei Yong emphasized that it cannot be ignored that the demand for olefins in China is strong and will remain so in the long term. As olefin feedstocks become lighter and more diversified, and especially as China’s methanol-to-olefins technology continues to mature, the non-petroleum-based olefins industry will shift from being a supplementary option at present to becoming the mainstream. The consumption of methanol in the production of olefins is growing the fastest; it has become the largest end-use sector for methanol, and will remain the main driver of demand for methanol in China in the future. Overall, the prospects for China’s methanol industry look promising in the future.