China Chemical Industry News: China’s methanol industry is going through a \"cold winter\"”
Thread Content
China’s methanol industry is going through a \"cold spell,\" said Gu Zongqin, president of the China Nitrogen Fertilizer Industry Association, at the 2020 China Methanol Industry Conference held in Ordos, Inner Mongolia, on August 20. Since 2019, and especially this year, the international situation has been highly complex. The sharp drop in oil prices, coupled with the unprecedented pandemic, have combined to inflict a severe impact on the global economy, creating significant downward pressure. China’s methanol industry has been severely affected, facing a difficult situation that is rare in recent years. The economic performance of China’s methanol industry since 2019 can be summarized in the following aspects: First, positive results have been achieved in the adjustment of the industrial structure. On the one hand, the coal-dominated structure of raw materials is more prominent. In 2019, China’s methanol production capacity based on coal as a raw material reached 67.791 million tons, accounting for 75.4% of the total production capacity – a 9.4 percentage point increase compared to 2018. The production capacity and share of methanol produced from natural gas decreased further. Methanol production using coke oven gas saw some new facilities come online as the coking industry recovered; in 2019, the production capacity for methanol from coke oven gas was 11.506 million tons, representing 12.8% of the total production capacity, with a year-on-year increase of 1.8%.
On the other hand, the level of industrial scale-up continues to increase. In 2019, capacity below 100,000 tons per year accounted for only 2.2% ； A production capacity of 100,000–300,000 tons per year corresponds to 15.616 million tons per year, accounting for 17.4% of the total production capacity, a decrease of 3.2% on a year-on-year basis ； The production capacity of over 300,000 tons per year reached 72.336 million tons per year, accounting for 80.4% of the total capacity, an increase of 10.7% on a year-on-year basis ； In particular, the coal-based methanol production capacity of 600,000 tons per year or more amounts to 46.04 million tons per year, accounting for 51.2% of the total production capacity. In addition, the industry’s efforts to reduce overcapacity have continued, further optimizing the structure of the methanol industry. In 2019, another portion of outdated and inefficient production capacity was phased out; as a result of thorough investigations and assessments, the amount of capacity that was removed amounted to 1.125 million tons.
Secondly, the use of advanced gasification technology gives significant benefits to the main unit of monohydric alcohol production. Driven by new coal gasification technologies, the scale, efficiency, and cleanliness of coal-to-methanol production have improved significantly, making it an important pillar of the methanol industry while also demonstrating strong market competitiveness. In 2019, the national methanol production volume was 69.97 million tons, representing a year-on-year increase of 4.2%. Among them, there are 78 companies using advanced new coal gasification technologies for methanol production; their combined methanol production capacity amounts to 55.68 million tons, accounting for 61.9% of the total production capacity, a increase of 12.1% compared to the previous year ； Production reached 52.89 million tons, accounting for 75.6% of the total output, an increase of 9.1% on a year-on-year basis. Meanwhile, the methanol production capacity and output of the methanol synthesis plants continued to decline. In 2019, the production capacity of these plants was 8.291 million tons, accounting for 9.2% of the total production capacity, a decrease of 7.8% on a year-on-year basis ； Production was only 4.496 million tons, accounting for 6.4% of the total output, a decrease of 22.1% on a year-on-year basis.
Third, market prices have continued to fall. 2017 and 2018 were good years for China’s methanol industry, with strong demand from downstream sectors and high market prices. Since 2019, the methanol market has undergone fundamental changes, with prices continuing to fall and the overall level being **lower than in the previous two years. The average price in 2019 was 2,116 yuan per ton, which was nearly 700 yuan lower than in 2018, representing a year-on-year decline of 24.8%. However, since the beginning of this year, methanol prices have continued to fall, exceeding people’s expectations; the average ex-plant price from January to June was only 1,669 yuan per ton, which is more than 200 yuan lower than the lowest level recorded in 2009, resulting in enterprise costs being higher than their selling prices. Almost all manufacturing enterprises in the industry are facing cost challenges; some are unable to maintain their cash flow and are forced to suspend production. In the first half of this year, methanol production amounted to 34.366 million tons, with little change compared to the previous year – a situation that is quite rare; the industry is currently going through a \"cold spell\".
Fourth, the volume of imported methanol has increased significantly. Due to the decline in international oil prices and falling natural gas prices, a large volume of international methanol products have flowed into our country. In 2019, China’s imports of methanol reached 10.89 million tons, a 46.6% increase on a year-on-year basis, setting a new historical high. The price of imported methanol has shown a significant downward trend overall; the average import price for the whole year was 267 dollars per ton, which is more than 120 dollars per ton lower than in 2018, representing a year-on-year decline of 32%. Since the beginning of 2020, import volumes have remained high; the total imports from January to June amounted to 5.98 million tons, a 28.6% increase compared to the previous year. Prices, on the other hand, continued to fall, with an average price of 208 dollars per ton during the first half of the year. In late June, the CFR price was only around $160 per ton. The increase in imports has also led to a significant rise in port inventories; levels of over 1 million tons have now become the norm, which has had a major impact on the domestic market and heightened the bullish sentiment in it.
Fifth, the downstream consumer market faces challenges. In 2019, several more coal/methanol-based olefin production facilities were put into operation in China, raising the country’s capacity for producing olefins from coal/methanol to 15.47 million tons. Moreover, these facilities operated at a higher rate on average compared to 2018, with a significant increase in methanol consumption. Driven by this, China’s apparent methanol consumption in 2019 continued to rise, exceeding 80 million tons, with a year-on-year increase of 9.8%. However, since the beginning of this year, due to the impact of the pandemic, demand from downstream sectors for methanol has remained weak overall. The operating rates of traditional downstream industries such as those producing formaldehyde and acetic acid are severely insufficient, while consumption of methanol as a fuel has also dropped sharply. The significant drop in oil prices poses a major challenge to the economic viability of methanol-to-olefins processes. Weak downstream demand is a key reason for the recent downturn in the methanol market. (Jiang Xiaomao)
The domestic methanol spot market is operating at a stable level, with prices easing in some areas. Companies in the main production areas in the northwest are offering low prices, orders are being placed smoothly, and overall shipments remain stable. Traditional demand remains weak, with some traders reporting low actual prices. Overall, there have been no significant changes in the methanol market ；
Since January 2020, methanol prices in China have been on a downward trend. In Inner Mongolia, the price reached a significant threshold of 1,300 yuan per ton at one point; in Jiangsu, it dropped to 1,440 yuan per ton, while in South China it reached 1,360 yuan per ton at its lowest point. In the first half of 2020, the national methanol market operated in a weak manner, with price differences between regions narrowing.