China’s methanol production capacity has exceeded 20 million tons. What are your views on the future prospects of the methanol market?
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China’s methanol production capacity exceeded 20 million tons, with the top three producers seeing another change in their rankings. In 2007, new and expanded methanol production capacities in China amounted to about 6 million tons, pushing the country’s total production capacity above 20 million tons – a 43% increase compared to 2006. With the scaling and integration of enterprises, the list of the top 10 in the country has been updated once again. The 1 million tons per year natural gas-to-methanol project of Inner Mongolia Boyuan United Chemical Co., Ltd. officially commenced construction on September 3, 2004, and was completed and put into operation on September 10, 2007. It replaced Pingmei Lan Tian to become the largest methanol producer in China. In second place is the Pingmei Lan Tian plant, with an annual production capacity of 730,000 tons ； The third is the 600,000 tons per year methanol production plant from CNOOC Jiantao Chemical Co., Ltd., which uses natural gas as raw material. In 2007, China’s apparent consumption of methanol increased significantly; it is initially estimated that the annual apparent consumption will exceed 11 million tons, representing an increase of around 31.7% compared to the previous year. In particular, in August of this year, the national apparent consumption volume exceeded 1 million tons for the first time, and in October it reached its highest level so far this year at around 1.1 million tons, representing a 30% increase compared to the highest monthly figure of 846,000 tons in June. China’s apparent consumption of methanol continues to show a high rate of growth, with the development of new downstream industries playing a key role in this; in 2007 alone, the demand for methanol driven by dimethyl ether was nearly 1 million tons. The new/initial domestic demand is largely met by domestic supply; in 2007, domestic supply accounted for 97.4% of total consumption, while imports accounted for only 7.6%, and part of those imports were used for re-export rather than being consumed domestically. International plant issues triggered a methanol \"famine,\" with global spot prices reaching record levels. In the second half of 2007, frequent problems with international methanol plants led to a shortage of methanol worldwide, causing prices to soar rapidly. According to Yi Mao’s incomplete statistics, from June to November 2007, production losses in regions around the world excluding China amounted to around 2.5 million tons, which is approximately 3.5 times the losses incurred during the period of plant-related problems in July and August 2006. Under these circumstances, it is not surprising that the global market rates have broken the records set in 2006. During this trading cycle, the spot price in the United States surged to 905–910 dollars per ton (FOB U.S. Gulf) in early November, representing a 17.17% increase compared to the highest level reached in 2006 ； European spot prices also reached their peak in early November at 530–535 euros/ton (FOB North-West Europe), which is 27.54% higher than the peak level seen in 2006. At the same time, the surge in prices in Europe and the United States, along with ongoing tensions in global supply and demand, have driven up prices in Asia’s spot market. In South Korea and Taiwan, the prices reached 590–600 dollars per ton (CFR South Korea) and 590–595 dollars per ton (CFR Taiwan), respectively, which is still 21.98% higher than the highest levels seen last year ； In Southeast Asia, the price reached a peak of 470–480 dollars per ton (CFR Southeast Asia) in 2006; this year it rose significantly to 580–600 dollars per ton (CFR Southeast Asia), representing an increase of 24.21% compared to last year. In 2007, China’s methanol imports decreased by a quarter, with a significant adjustment in the structure of imported supplies. China’s growing self-sufficiency in methanol, coupled with overall tight international supply, led to a year-on-year decline in methanol imports at a rate of 15% starting from 2002. The frequent international equipment problems in 2006 and 2007 further accelerated foreign companies’ adjustment of their strategies toward China, reducing shipments to the minimum. According to official statistics, China’s total methanol imports from January to October 2007 amounted to 679,900 tons, a 34.3% decrease compared with the same period last year. Methanol imports continued to decline in November and December, and based on this, Yitao estimates that the total methanol imports for the whole of 2007 will be around 850,000 tons. Against this backdrop, the pattern of the import market underwent significant changes in 2007: Methanex, which had topped the supply list for three consecutive years, was expected to see its import volume decrease by 80% compared to the previous year. Although the supply from Iran increased by a significant 128% to 250,000 tons compared to last year, it should be noted that only a small portion of this supply comes directly from manufacturers, while the majority is supplied indirectly by foreign traders. Saudi supplies have decreased compared to 2006, with interruptions to users being the main issue. It is also worth noting that Oman’s 1 million-tonne facility, which began operations in July, entered the Chinese market in the fourth quarter; together with Petronas, which started operations in 2008, they will serve as consistent and stable suppliers to China, representing a significant new force in imports during that year.
“The fact that the national production capacity has exceeded 20 million tons, representing a 43% increase compared to 2006, shows that the rapid growth of downstream products derived from methanol, along with the swift development of methanol-based gasoline, have prevented the methanol market from declining as some people had expected. Instead, it has managed to expand its share in the energy sector and strengthen its position. The positive trends related to new methanol production capacities, expansions in such capacities, and the overall health of the methanol market are likely to continue for at least the next two years.
Overall, there are too many new methanol projects, and they are of large scale; without major downstream products to drive demand for it, there is a high risk of an oversupply situation
The figure of 20 million is the official one, but in my opinion, the actual capacity exceeds 25 million. (I often see that the statistics on the methanol websites are inaccurate and consistently on the low side.)
Developing downstream products of methanol is an inevitable choice for various methanol plants. At present, among coal chemical technologies, the threshold for entering the methanol industry is the lowest; with sufficient funds, one can purchase gasifiers and synthesis towers to produce methanol, and coal mines are organizations that have such funds. Another option is methanol-based gasoline; if such gasoline could be used nationwide, then the current production volume of methanol would be merely a fraction of what’s needed. However, making methanol gasoline available nationwide is not something that any single entity can accomplish; it requires the joint efforts of **, as well as companies such as CNPC and Sinopec – otherwise it’s impossible. Methanol gasoline is the fastest route, although it involves the most extensive engineering work; thanks to its simplicity, China has been using it for nearly forty years. Personal opinion, for reference only: L
Looking at the global development trends of methanol, it is expected that during the 11th Five-Year Plan period, international methanol prices will be primarily determined by when the production capacity of large-scale methanol plants under construction comes online, as well as by changes in supply and demand resulting from maintenance shutdowns of global methanol production facilities, along with the impact of international oil prices and other factors. It is expected that international methanol market prices will remain at a relatively high level from 2007 through the first half of 2008. From the end of 2008 to 2010, as large-scale international methanol plants were basically completed and put into operation, competition in the methanol market intensified significantly. The methanol prices in the major global markets differ only in terms of shipping costs. China's methanol market is still, first and foremost, influenced by the international methanol market. It is expected that the domestic market will maintain a certain degree of strength in 2007; the bullish trend that has persisted since 2002 will continue to some extent, with production and sales volumes remaining high, and prices staying at relatively high levels. However, market volatility is likely to increase. The prices in 2010 were primarily determined by the adoption of fuel methanol and the maturity of methanol-to-olefins technology. By then, if methanol is widely used as a fuel, there will be no issue of excess supply regardless of the amount of methanol available; otherwise, methanol will still be in excess.