National methanol production capacity exceeds 100 million tons! In 2023, methanol production exceeded 83.173 million tons
Thread Content
The growth rate of new production capacity in 2024 is likely to remain on par with that in 2023. Imports are set to become a key factor influencing the market for methanol. Analysts believe that in 2024, methanol prices will continue to follow seasonal patterns, while also being affected by macroeconomic conditions and costs; the key to price fluctuations lies in the volume of imports. Specifically, in the first and fourth quarters, methanol usually faces domestic policy-driven production restrictions, as well as expectations of reduced imports due to overseas gas supply constraints, which pushes its price level upward. In the second and third quarters, imports will return to high levels; coupled with a weak demand period accompanied by a stock-building cycle, there is a high likelihood of price declines. In 2023, methanol prices followed an “M” shaped trend. In the first half of the year, methanol prices rose before falling; in the second half, they reached a bottom and then started to rise again, fluctuating along the way. The overall trend for the year was therefore “M” shaped, and it can be divided into the following four stages: The first stage was in January 2023, during which some production facilities both domestically and internationally shut down for maintenance, which helped to support supply levels ； On the other hand, improved macroeconomic sentiment provided psychological support, allowing methanol prices to continue rising on the upward trend that has persisted since mid-December 2022. On the first trading day after the Spring Festival, methanol futures continued their previous upward trend, reaching a peak of 2,818 yuan per ton, an increase of 6.22% compared to the end of 2022. Second stage: After the Spring Festival, the support for methanol costs weakens. Although methanol imports increased steadily from May to June, downstream demand did not increase in parallel. Coupled with the sharp drop in crude oil prices caused by the banking crises in Europe and the United States, methanol prices continued to fall until mid-June. On May 26, the price reached its lowest level of the year at 1,953 yuan per ton, a decline of 30.69%. Third stage: After mid-June, on the one hand, the cost of methanol continued to rise ； On the other hand, the recovery of methanol supply during July and August fell short of expectations, with inventories in the main production areas remaining low. Meanwhile, a series of favorable policies in areas such as the domestic economy and real estate sector contributed to an improvement in the operational rates of methanol downstream industries, particularly MTO plants. The combined effect of these favorable supply and demand conditions drove up methanol prices throughout mid-July to mid-September. Furthermore, the Federal Reserve’s suspension of interest rate hikes after July has also helped restore expectations for overseas demand. On September 19, the price of methanol reached a peak of 2,662 yuan per ton, an increase of 36.30%. Fourth stage: In late September, as inventory levels of raw materials downstream gradually increased, raw material prices declined. Coupled with the downward trend in chemical products, methanol prices also dropped fluctuately. On October 24, the price of methanol dropped to 2,363 yuan per ton, a decrease of 11.23%. After November, as temperatures dropped, the cost of coal-based methanol stabilized once again. Coupled with expectations of gas supply restrictions both domestically and internationally, as well as high demand from downstream industries, methanol found support at lower levels. However, it was suppressed at higher levels by factors such as excessive imports and negative feedback regarding profits in the downstream sector; as a result, methanol prices fluctuated within the range of 2,341–2,537 yuan per ton.
The growth rate of new production capacity in 2024 is likely to remain the same as that in 2023. In 2023, China’s total methanol production capacity was around 106.3 million tons, with new methanol production facilities adding more than 6.3 million tons to this capacity, resulting in an annual growth rate of around 6.3%. From a global perspective, the industrial synthesis of methanol almost always relies on the pressurized catalytic hydrogenation of carbon monoxide and carbon dioxide; a typical process includes steps such as the production of feed gas, purification of the feed gas, methanol synthesis, and distillation of crude methanol. Natural gas, naphtha, heavy oil, coal and its processed products (coke, coke oven gas), acetylene off-gases, etc., can all be used as raw materials for producing methanol synthesis gas. In the future, with technological advancements, it is possible that new processes will emerge. Except for our country, methanol production around the world is primarily based on natural gas as a raw material; whereas in our country, due to the resource profile of abundant coal, limited oil, and scarce gas, methanol production relies mainly on coal as the feedstock. By the end of 2023, China’s coal-based methanol production capacity accounted for 73.49% of the national total, a slight decrease of 3.4 percentage points compared to 2022. More methanol production facilities powered by coke oven gas came online in 2023, accounting for 16.69%, an increase of 3.95 percentage points compared to 2022. The share of natural gas-based methanol production facilities remained relatively stable at 9.28%, with a slight increase of 0.04 percentage points compared to 2022. We expect an additional methanol production capacity of 7.85 million tons in 2024, including 6.6 million tons from Baofeng in Inner Mongolia, 550,000 tons from Junzheng in Inner Mongolia, 300,000 tons from Jinkai Chemical in Henan, and 400,000 tons from Guanneng in Ningxia. The growth rate of new methanol production capacity in 2024 is expected to be 7%, remaining unchanged on a year-on-year basis compared to 2023. In 2023, China’s methanol production was approximately 78 million tons, an increase of about 2.35% compared to the previous year. In the first half of the year, both the operation rate and production volume of methanol in China were lower than those in the same period of 2022. This was mainly due to losses incurred by coal-based methanol plants as a result of rising coal prices, which led to frequent maintenance activities for such plants as well as for methanol production facilities integrated with olefin production processes. In the third quarter, as maintenance activities resumed and new production capacity was brought online, domestic methanol operation levels and production volume rose rapidly, reaching record highs. In the fourth quarter, domestic methanol production capacity declined, driven by factors such as plant maintenance, winter gas restrictions, and environmental safety inspections. As a result, domestic methanol production dropped, but it remained at the highest level for the same period in history, owing to the significant increase in production capacity during the year. In 2024, although there will still be significant new capacity for methanol, much of it will be accompanied by downstream applications, with the focus mainly on competition over existing capacity. In the coming years, high-cost methanol production facilities with existing capacity in the upstream sector may enter a phase of capacity reduction. Moreover, under the strict implementation of the \"dual carbon\" policy guidelines, it will be difficult to add new production capacity in China’s coal chemical industry. It is estimated that domestic methanol production in 2024 will be 79.5 million tons (this estimate is not significantly affected by the fact that the two large-scale production facilities owned by Baofeng and Zhongtai are likely to come online by the end of the year). The growth rate in production is expected to be around 1.92%.
The increase in downstream demand is mainly reflected in areas other than olefins. Over the past 10 years, China’s consumption of methanol as a raw material for various applications has been on the rise, with two periods of rapid capacity expansion occurring during this time; starting in 2019, the pace of capacity growth began to slow down. In 2013, China’s downstream consumption of methanol was only 32.51 million tons; by 2022 this figure had risen to 88.05 million tons, representing a growth of 170.86%. In 2023, olefins and traditional downstream industries continued to show growth, and with the rapid development of some emerging sectors, the consumption of methanol in downstream applications was estimated to be 92.326 million tons, representing a 4.86% increase compared to 2022. The coal-based methanol-to-olefins industry has experienced rapid development over the past 10 years; as a major downstream consumer of methanol, it plays a significant role in driving growth in industry demand. As production capacity in some traditional downstream sectors continues to expand, their profit margins shrink, reducing their willingness to invest in new operations; as a result, the demand for methanol increases only modestly. In 2023, demand from end-users of dimethyl ether remained weak, with its share of total consumption declining significantly. In 2023, the overall operational level of methanol downstream industries showed a pattern of low levels at the beginning and then an increase thereafter. It was significantly lower than in the same period during the first half of the year; operations began to recover after entering the third quarter, reaching their highest level on record in the fourth quarter. Among these, the main reason for the sluggish start in the first half of the year was the low olefin load. Due to prolonged losses in the past, multiple MTO external processing units were shut down or operated at reduced capacity starting from the fourth quarter of 2022. Multiple CTO integrated units in the domestic market underwent annual maintenance during the first half of 2023. In the third quarter, operations resumed with the restart of Sierbang in mid-August, the commissioning of Baofeng Phase III at the end of August, and the restart of Xingxing in September; coupled with the resumption of operations at the CTO integrated units after their annual maintenance, olefin production in China saw a significant increase. Although production dropped slightly again in the fourth quarter due to the shutdown or reduced operation of certain units such as Changzhou Fude, it remained at historically high levels overall. In the traditional downstream sector, formaldehyde production facilities are currently moving toward larger-scale projects, and competition as well as industry differentiation are quite intense; as a result, the overall level of operations throughout the year remains at historically high levels. Dimethyl ether, affected by strict regulations in the fuel sector regarding factors such as LPG blending, continued to operate at a low level, with production remaining at its lowest level on record throughout the year. Due to the strong demand for acetic acid in downstream applications such as PTA and vinyl acetate, new production capacity has been added in recent years, and the annual operating rate has remained at a historically high level. Within the year, demand for overseas crude oil blending exports of MTBE increased significantly. Driven by high profits, some projects that had been shut down for long periods resumed operations, and new projects started up more rapidly. Since the second half of the year, the level of operation has remained at its highest level for the same period in history, with a continuous rise in operations throughout the year. We expect MTO demand to remain stable in 2024, with some new demands and energy-related consumption potentially driving growth. The commissioning of coal-based chemical plants has entered a downturn period; coupled with the impact of policies aimed at controlling energy consumption, it is unlikely that new CTO plants will be put into operation in the future. Moreover, MTO holds less competitive advantages compared to oil-based chemical processes, and the olefin industry is also gradually entering a phase of overcapacity, which reduces the enthusiasm for investing in MTO projects. In 2024, the growth in the downstream sectors of methanol was primarily seen in non-olefin-related areas such as BDO and acetic acid industries, and this growth was often linked to the new production capacity for methanol. In 2024, there are still plans to add new production capacity for acetic acid, and some of the additional demand could create new areas of growth, such as BDO, silicones, and dimethyl carbonate. Furthermore, in terms of energy-related demands, the number of global orders for methanol-powered ships is on the rise year by year. Green methanol fuel for ships is already being used, and it is set to become another driver for growth in methanol demand in the future. Looking ahead to 2024, there are strong expectations of a recovery in the macroeconomy both domestically and internationally; it is anticipated that demand will remain at a high level overall. However, the issue of profit disparities continues to pose a significant constraint on the total volume of demand. It is estimated that domestic methanol consumption in 2024 will be 94.55 million tons, with a year-on-year growth rate of 2.42%.