The methanol industry has entered a critical period for laying the foundation for high-quality development

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On April 17, Gu Zongqin, president of the China Nitrogen Fertilizer Industry Association, said at the 2024 China Methanol Industry Conference held in Jiujiang, Jiangxi, that the domestic and international environment in 2024 is more complex and severe, with an increase in external risks and challenges. Geopolitical risks have heightened external uncertainties, while domestic economic development is faced with both cyclical and structural issues, and effective demand remains insufficient. China’s methanol industry has entered a critical period marked by a shift in driving forces, efforts to overcome challenges, and the laying of foundations for high-quality development. First, the world economy still faces many challenges. According to Gu Zongqin, president of the China Nitrogen Fertilizer Industry Association, since 2022, the global economy has fallen into a new round of stagflation as a result of various major risk factors such as intensified geopolitical conflicts, rising global inflation rates, tight monetary policies in developed countries, and the reshaping of global supply chains following the COVID-19 pandemic. In 2023, global inflation saw some relief, but there are still many short-term and long-term factors contributing to the slowdown of the global economy. These include the transformation of the Russia-Ukraine conflict from an unexpected event into a persistent one, the outbreak of various geopolitical conflicts such as those in the Red Sea, challenges to the resilience and stability of developed countries’ financial systems, the persistence of trade protectionism and resource nationalism, and the high costs associated with decarbonizing the global economy. The development and evolution of these factors could all have a negative impact on the global economy, undermining its growth. According to the latest report by the International Monetary Fund, global economic growth is expected to reach 3.1% in 2024, remaining unchanged from 2023 ； The World Bank expects global economic growth to be 2.4% this year, 0.2 percentage points lower than last year ； The WTO predicts that global merchandise trade volume will grow by 3.3% in 2024. The aforementioned major global international economic organizations’ forecasts for overall global economic growth and trade are all below historical averages. Second, the global energy market continues to move forward amid fluctuations. In 2023, the average annual price of Brent crude oil futures was $82.17 per barrel, down 17% from the previous year, yet it remained at the upper end of oil price levels over the past 10 years. Looking back at oil price changes over the past year, Brent crude prices rose briefly at the beginning of the year before falling sharply in March, dropping to a low of $70 per barrel. In mid-April, affected by factors such as OPEC+ production cuts, oil prices rose briefly before falling again. In July, driven by geopolitical tensions, oil prices continued to rise, and the new round of conflicts between Palestine and Israel pushed oil prices to new highs for the year. However, since late October, international oil prices have once again entered a downward trend. Meanwhile, there have been changes in the supply and demand of crude oil. The International Energy Agency’s (IEA) report on the crude oil market released in November last year indicated that, as global economic growth slows down and the effects of high interest rates become apparent, the growth rate of crude oil demand will slow down significantly by 60%, leading to a situation of surplus supply in the market. As a result, the control over oil prices has shifted from the supply side to the demand side. Based on this, the IEA has lowered its oil price forecasts for 2024, estimating that the WTI futures price will be $78.07 per barrel, down from the previous forecast of $89.24 per barrel ； The price of Brent crude oil is expected to be $82.57 per barrel in 2024, down from the previous estimate of $93.24 per barrel. In terms of the natural gas market, gas prices have dropped from their historical highs to levels prior to the Ukraine crisis, but prices in Eurasia remain at relatively high historical levels. Meanwhile, given that the global balance between gas supply and demand remains fragile, the possibility of sudden supply disruptions leading to irrational price increases and volatility in natural gas prices cannot be ruled out. Third, the positive trend of recovery in China’s economy has been further consolidated and strengthened. At present, China's economic development still faces some difficulties and challenges. To do a good job in this year’s economic efforts, the Central Economic Work Conference emphasized that we must adhere to the general principle of making progress while maintaining stability, using progress to foster stability and establishing new foundations before making changes. We should take proactive actions to shift development patterns, adjust economic structures, improve quality, and enhance efficiency, thereby continuously strengthening the foundation for steady improvement. Strengthen the counter-cyclical and cross-cycle adjustment of macro policies, continue to implement proactive fiscal policies and prudent monetary policies, and enhance innovation and coordination among policy tools. According to the **Statistics Bureau**, in January and February of this year, production demand in China increased steadily, the employment situation remained generally stable, the quality of development continued to improve, and the economic trend showed a positive upward trajectory with a smooth start, laying a solid foundation for steady and rapid economic growth throughout the year. With the recovery of the macroeconomy and the gradual improvement in downstream end-use consumption, demand for chemicals is expected to recover. Fourth, the methanol markets at home and abroad remain unfavorable. Looking at the global situation, in recent years, affected by factors such as the sluggish world economy, world methanol prices have remained at low levels. Recently, the global political and economic situation is not promising, and the world methanol market remains pessimistic. Regarding natural gas prices, there are many factors that influence the price of natural gas worldwide, and there remains a high degree of uncertainty. Since the larger methanol companies in the world generally enter into long-term contracts with gas-producing companies regarding raw material prices, market prices do have an impact on methanol costs; however, based on the situation in previous years, this impact is limited ； In terms of methanol production capacity, in regions with abundant natural gas resources such as the Middle East, there are frequent reports of new plants being built, and the situation of overcapacity will not change fundamentally ； In the methanol product market, it is still primarily used in traditional sectors; new and larger markets remain to be developed. The current focus in the development of the methanol industry is green alcohols, primarily due to the imposition of carbon emission taxes in regions such as Europe. Gu Zongqin analyzed that, from the perspective of the domestic situation, although China’s methanol industry has seen remarkable growth over the past decade or so, this is mainly due to breakthroughs in methanol-to-olefins technology. We believe that in the near future, the domestic methanol market size will continue to grow. This is mainly because production facilities for producing olefins from methanol remain a key focus in the development of coal-based chemical industries, and new such facilities will be built. However, the methanol produced from coal-based olefins is primarily used for internal needs, with only a small amount of it being used as commercial methanol to balance supply and demand, so its impact on the commercial methanol market is limited ； Recently, the domestic economy has performed better than last year, and there are signs of improvement in the situation for methanol-based downstream products ； The price of coal, the raw material for methanol, continues to decline, which is beneficial for reducing methanol costs and enhancing competitiveness. It must be noted, however, that the domestic methanol market is generally characterized by overcapacity, and there is no possibility of any fundamental change in the short term; as a result, the market price of methanol is unlikely to rise significantly.