Excess methanol production capacity: Companies seek new outlets

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http://www.mhgcy.ibicn.com/news/archive/201009/002671814146318398966.html As is well known, the coal chemical industry has long suffered from problems resulting from its extensive and overheated development; this has led to severe overcapacity in traditional coal chemical products such as methanol, a high proportion of less competitive production capacities, and generally low operation rates. For example, in 2009 China had a methanol production capacity of 22 million tons per year; excluding dimethyl ether production, the operating rate of the facilities was only 50%. During the same period, methanol imports reached 5.29 million tons ； For another example, methanol manufacturers with an annual production of less than 100,000 tons account for about 37.7% of the total national production; their raw material sourcing methods are not entirely optimal ； The product structure is similar, with many primary products and few deeply processed products ； The overall level of technology and equipment is low, with high consumption of resources and energy ； The average size is small, showing a pattern of being small and scattered. This has led to such severe overcapacity in the methanol industry. To address this issue, **a series of policies have been introduced with the aim of eliminating the excess production capacity. It is understood that the Ministry of Industry and Information Technology has required various provinces and cities to take comprehensive measures to ensure that all the enterprises on the list shut down by the third quarter (September 30). 　　The introduction of these policies is certainly a good thing for chemical companies, yet they have also adopted new approaches to address the issue of overcapacity in the methanol industry. 　　Chemical companies expanding project capacity CNOOC: CNOOC’s ongoing and planned projects include the Hainan methanol plant with an annual production capacity of 800,000 tons, scheduled to begin operations in the fourth quarter of 2010, as well as the Inner Mongolia polyoxymethylene plant with an annual capacity of 60,000 tons. There is also the 1 million-ton urea production project at Jincheng Coal Chemicals, which is under planning, as well as the 520,000-ton urea production project at Huahe Coal Chemicals, whose acquisition is imminent. It is expected that these projects will bring significant revenue growth to the company during 2011–2013. 　　Methanol-to-olefins projects have become a lifeline for methanol producers. By the end of 2009, the total planned production capacity for coal-to-olefins across the country had exceeded 20 million tons. The production volume of olefins produced from methanol, which came online or is scheduled to come online in August alone this year, has already reached around 4.4 million tons. 　　On August 27, the signing ceremony for the strategic cooperation between the People’s Government of Jiaxing City and the Dalian Institute of Chemical Physics, Chinese Academy of Sciences, as well as the signing ceremony for the technology licensing related to methanol-to-olefins (DMTO) production, were held in Jiaxing Port Area. The signing of this agreement marks the official establishment of Zhejiang Xingxing New Energy Technology Co., Ltd.’s methanol-to-olefins project in Jiaxing Port Area. 　　At the beginning of August, the **\"863\" project** undertaken by the Shanghai Research Institute of Chemical Industry – a new manufacturing process for producing olefins from methanol featuring high selectivity and low wear – was recently approved by the Shanghai Municipal Commission of Economy and Informatization. 　　On August 2, Donghua Technology and Yuanxing Energy signed an engineering design contract for a 1 million tons per year methanol-to-olefins project in Ordos City, Inner Mongolia ； On August 10, Sinopec signed an agreement with Hebi City in Henan Province regarding cooperation on the Hebi coal-to-chemicals integration project; Sinopec will build a methanol-to-olefins plant with an annual capacity of 1.8 million tons there ； On August 25, Total, one of the world’s four major petrochemical companies, said it plans to invest in Inner Mongolia, China, to build the world’s first integrated coal-to-olefins plant with an annual production capacity of around 1 million tons ； On August 27, Zhejiang Xingxing New Energy Technology Co., Ltd.’s 600,000 tons per year methanol-to-olefins project was officially established in Jiaxing Port Area. 　　Prior to this, the first phase of Yanzhou Coal Industry Ordos Energy Chemicals’ 1.8 million tons per year coal-to-methanol project commenced construction in Inner Mongolia in March; the company will also accelerate the preliminary preparations for a project to convert methanol into 1 million tons of olefins ； In May, Shanxi Broccoli Coal Industry Group signed a cooperation agreement with Sinopec Nanjing Chemical Company to jointly build a project in Jincheng, Shanxi, capable of producing 1.8 million tons of methanol and 600,000 tons of olefins per year. 　　In addition, by the end of 2010, China will have capacity for 1.58 million tons of polyolefins produced from coal, including 300,000 tons of polyethylene and 1.28 million tons of polypropylene. This capacity will come from projects such as Shenhua Baotou’s plant for producing 300,000 tons of polyethylene and 300,000 tons of polypropylene from coal, Datang Dolun’s plant for producing 460,000 tons of polypropylene per year from coal, and Shenhua Ningmei Group’s plant for producing 520,000 tons of polypropylene per year from coal. 　　In summary, coal chemical giants are launching methanol-to-olefins projects to address the issue of excess methanol capacity. The methanol market will also be substantial. Looking ahead, as market supply pressures ease and expected demand increases, traders’ confidence rises, providing some upward momentum for the methanol market.