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Methanol industry identifies five key areas of focus Author/Source: Sinochem New Network Date: August 21, 2020 Clicks: 7 On August 20, 2020, the China Methanol Industry Conference was held in Ordos, Inner Mongolia. Gu Zongqin, president of the China Nitrogen Fertilizer Industry Association, said in his speech at the conference that although our industry is currently facing numerous difficulties, risks and challenges, we must seek new opportunities in times of crisis and create new prospects amid changes. The four fundamental characteristics and significant advantages of our country – namely, its strong economic potential, resilience, ample room for maneuver, and a wide range of policy tools – were fully demonstrated and proven during the fight against this pandemic. As the epidemic situation gradually improves, various economic indicators in our country are showing marginal improvements, and there are signs of an accelerated pace of economic recovery. Economic recovery is beneficial for China’s methanol industry. Analyzing the situation, there are five main areas that should be focused on in the next steps. First, actively maintain the healthy and stable operation of the market. Gu Zongqin explained that, at the current market price levels, methanol producers in China face significant operational pressures and poor profitability. The China Nitrogen Fertilizer Industry Association has received numerous letters from companies reporting on the situation. The China Nitrogen Fertilizer Industry Association has sent representatives and letters on multiple occasions, actively reporting to relevant ministries and commissions such as the Ministry of Commerce, the National Development and Reform Commission, and the Ministry of Industry and Information Technology to convey the demands of the enterprises. The issues reflected mainly fall into three categories: first, anti-dumping issues; second, the pursuit of preferential policies; third, issues related to the methanol futures market. These three issues have persisted to this day without interruption. In the first half of this year, the methanol market remained sluggish, and the association received letters from another ten key companies. In response to the requirements of enterprises, the association believes that it is necessary to improve the external environment on one hand, while measures also need to be taken within the industry itself on the other hand. Therefore, by learning from the practices of other related industries, an initiative was launched across the entire sector, calling on companies to adjust their production levels according to the conditions of their facilities and market demands, to carry out planned maintenance activities in a staggered manner, to reduce the supply of methanol, to stabilize the economic operations of the industry, and to alleviate the imbalance between supply and demand. The association also sent a letter to the Zhengzhou Commodity Exchange, drawing attention to the performance of methanol futures, with the aim of fully leveraging the positive roles of financial derivatives such as futures and options to foster healthy interaction between the spot market and the futures market. This time, the leaders of the Zhengzhou Commodity Exchange also attended in person to specifically hear the opinions of the enterprises. Next, we plan to hold a symposium with relevant departments from the Ministry of Commerce involving domestic and foreign methanol sellers, in order to discuss how to regulate the domestic methanol market. Second, take multiple measures to expand domestic demand. Gu Zongqin pointed out that to expand demand, it is necessary to take meeting domestic demand as the starting point and goal of development. During the pandemic, the urgent shift by some methanol-to-olefins manufacturers to produce medical-grade polypropylene materials was a breakthrough attempt. In the future, while further strengthening sales within the traditional industrial chain, greater efforts must be made to expand and extend this chain in order to open up new markets. Based on our analysis of the current market, we believe that methanol fuel represents a sector with strong growth potential at present. Through several years of market development, the energy applications of methanol are expanding rapidly, showing great potential in both power generation and thermal fuel applications. In terms of power generation through combustion, methanol is used as a fuel for vehicles in countries such as Denmark, the United Kingdom, and Iceland in Europe. In China, pilot projects were carried out in four provinces and one municipality between 2012 and 2017; since 2019, its use has been promoted more actively in key provinces and cities. Currently, there are nearly 10,000 methanol-powered vehicles in Guizhou Province, while in Xi’an City, the number of such vehicles exceeds 8,000. As a marine fuel, methanol has become an important solution worldwide to address the International Maritime Organization’s (IMO) sulfur limits and to serve as a substitute for traditional marine fuels. Significant progress has been made in the development of Methanex dual-fuel methanol carriers, which are capable of using both methanol fuel and conventional marine fuels. In terms of thermal combustion, methanol is seeing the emergence of application markets as a fuel for industrial boilers, industrial furnaces, clean heating systems, and cooking stoves. Regarding the fuel for industrial boilers, China has over 600,000 such boilers, with an annual coal consumption of around 700 million tons. With the implementation of environmental protection policies such as clean heating in northern regions and efforts to combat air pollution, it was required that small and medium-sized boilers with a capacity of 35 tons per hour or less stop using coal by the end of 2018; this applied to approximately 420,000 such boilers. If calculated at 5% for the conversion of coal to methanol fuel, a market for methanol boiler fuel of around 24 million tons will be created. Regarding the fuel used in industrial furnaces, in 2019 four ministries jointly issued the \"Comprehensive Plan for Controlling Air Pollution from Industrial Furnaces\", which called for \"accelerating the use of clean and low-carbon energy sources in industrial furnaces that rely on coal, petroleum coke, residue oil, heavy oil, etc., as well as utilizing waste heat from factories and thermal energy from power plants as alternatives.\" Currently, methanol furnace fuel is being gradually applied in industries such as boiler cleaning and renovation, heating systems, integrated heating systems and distributed application systems, ceramic firing, drying processes, metal heat treatment, hot working, and non-ferrous metal smelting. In terms of fuels for clean heating, the total area of buildings in urban and rural areas in northern China used for heating is approximately 20.6 billion square meters, and efforts to replace coal with gas, electricity, or alcohol are being accelerated there. According to incomplete statistics, the number of methanol heating furnaces in use in China was 5,816 in 2016, around 30,000 in 2017, and over 50,000 in 2018, showing rapid growth. Regarding methanol stoves, thanks to their unique vaporization structure design, they enable more complete combustion and thus offer better energy-saving effects. They are suitable for use in the canteens of hotels, guesthouses, schools, factories, government agencies, and other such establishments. To date, they have been promoted and used in provinces such as Shanxi, Shaanxi, Henan, Anhui, and Guizhou. Third, persist in promoting innovation. Gu Zongqin emphasized that science and technology are the primary driving force for development, and they represent an urgent need as well as an important support for promoting high-quality economic and social development and facilitating the transition from old to new drivers of growth. Firstly, significant efforts must be made in key areas and critical links to accelerate breakthroughs in core technologies, raw materials, and equipment manufacturing. For example, it is necessary to achieve efficiency in terms of raw materials by developing gasifiers that can process low-quality coal, local coal, and high-sulfur coal, as well as heat recovery systems for waste boilers, in order to further improve the efficiency of purification and synthesis. Secondly, it is important to seek efficiency through management innovation and to strive to enhance management levels. Management innovation is the focus and breakthrough point for accelerating development and reducing costs while increasing efficiency; it is a key element of comprehensive innovation. As a representative enterprise in the coal-to-olefins sector, China Coal Shaanxi Yulin Energy Chemical Co., Ltd. has carried out a great deal of productive work in this area, and they were specially invited to speak at this conference in the hope that their insights will inspire everyone; thirdly, it is necessary to accelerate the integration of new-generation information technologies with various industries, thereby promoting the digital transformation of these sectors. Leverage new technologies and applications such as 5G and the industrial Internet to carry out comprehensive, multi-faceted, and end-to-end transformation of traditional industries, thereby promoting the deep integration of the Internet, big data, artificial intelligence, and the real economy. The Ministry of Industry and Information Technology has carried out pilot demonstrations for synthetic ammonia at CNOOC Hainan Company and Xinlianxin Company; once these pilots are successful, the methanol industry can follow their example. Fourth, safety and environmental protection must be given top priority. Gu Zongqin pointed out that in recent years, the **** and the State Council have attached great importance to work related to safety and environmental protection, setting increasingly higher standards; meanwhile, the relevant departments have also intensified their oversight in these areas. We must firmly establish a sense of safety awareness and fully recognize the importance of green development in order to prevent and curb the occurrence of severe accidents. Regarding the safety and environmental aspects of these installations, companies need to conduct regular assessments. They should also engage in more exchanges and communications within the industry, learn from the successful practices of other companies, increase their investment efforts, address any historical shortcomings, and meet the requirements of new regulations. Moreover, they must continuously use advanced, proven technologies to upgrade existing installations. At the same time, it is necessary to focus on production management and never slack off in terms of safety and environmental protection; any issues that arise must be resolved promptly to ensure that there are no hidden dangers in the facilities. One should not operate these facilities while they have defects just for short-term economic gains. Fifth, it is necessary to control production capacity and optimize the structure. Gu Zongqin believes that although China is the world’s largest producer of methanol, the fact that it is large but not strong remains unchanged; the era of winning through volume has come to an end. On the basis of the industry’s current state, it is necessary to manage properly the relationship between new developments and existing assets, further optimize the industrial structure, improve the supply-demand balance, and enhance core competitiveness. Methanol projects often involve high construction costs and substantial energy consumption, and have a significant impact on the market and the industry. Careful consideration must be given to their planning and construction; impulsive decisions should be avoided, and factors such as resources, the environment, and the market must be thoroughly taken into account to prevent blind following of trends. Regarding existing production capacity, it is necessary to continue advancing the process of phasing out outdated facilities, to increase efforts in technological upgrades, to improve the technical standards of existing facilities, and to optimize the industrial structure. Every effort should be made to reduce production costs and enhance the economic efficiency of enterprises. Gu Zongqin pointed out that the 13th Five-Year Plan is coming to an end, and the 14th Five-Year Plan is about to begin. Looking back at the 13th Five-Year Plan, the methanol industry has made significant progress. Looking ahead to the 14th Five-Year Plan, our entire industry faces extremely challenging tasks; we need not only to achieve transformation and upgrading of traditional industries but also to find new paths for development that go beyond the conventional approaches of these industries.