China’s methanol production capacity exceeds 100 million tons! Do you know which ones are in the top 20? ? ?
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On April 26, 2023, the China Methanol Industry Conference was held in Nanjing, Jiangsu. According to statistics from the China Nitrogen Fertilizer Industry Association, in 2022 China’s methanol production capacity reached 100.41 million tons per year, exceeding the 100 million ton mark. During the conference, the list of the top 20 methanol producers in the country for 2022 was released; **Energy Investment Group Co., Ltd., Shaanxi Yanchang Petroleum (Group) Co., Ltd., and Shandong Energy Group Co., Ltd. ranked among the top three. In 2022, the global political and economic landscape was complex, with the energy situation becoming increasingly severe. High domestic raw material costs coexisted with downward pressure on the market. Despite these challenges, China’s methanol industry managed to overcome difficulties and make progress, achieving significant development results. The total production capacity has exceeded 100 million tons. Gu Zongqin, president of the China Nitrogen Fertilizer Industry Association, noted that methanol has become the second petrochemical product in China, aside from refined oil, to have a production capacity of over 100 million tons. In terms of growth rate, production capacity increased by 3.1% on a year-on-year basis, with the growth rate declining by 3.5 percentage points; the net increase was 2.98 million tons per year, which represents a decrease compared to previous years. Last year, only one facility in Inner Mongolia’s Jiutai launched operations for projects with a production capacity of 1 million tons or more. The main reason for the slowdown in production capacity growth is, on the one hand, the impact of **energy consumption control policies** ； On the other hand, the ongoing weakness in the methanol market is dampening investment enthusiasm. From an analysis of the types of raw materials used for new production capacity, there has been a significant increase in projects that use coke oven gas as a raw material; over the past two years, as many as ten new facilities have come online, with a total production capacity of over 2 million tons per year. This not only optimizes the structure of the methanol industry but also aligns with the development trends of environmental protection and comprehensive utilization of resources. By the end of 2022, the national methanol production capacity using coke oven gas as a raw material was 12.58 million tons per year, accounting for 12.5% of the total production capacity.
The growth rate of output has slowed down. According to statistics from the China Nitrogen Fertilizer Industry Association, China’s methanol production in 2022 was 80.225 million tons, representing a 3.3% increase year-on-year; this growth rate was the lowest in five years, and it is directly related to the weak performance of the methanol industry chain. According to Gu Zongqin’s analysis, coal production amounted to 67.941 million tons, accounting for 84.7% of the total output, with a year-on-year increase of 2.2% ； The production of methanol from coke oven gas was 7.262 million tons, accounting for 9.1% of the total output, with a year-on-year increase of 20.3% ； The production of methanol from natural gas remained stable, accounting for 6.3% of the total. In coal-to-methanol production, the coal mono-alcohol plants that utilize advanced new coal gasification technologies have an annual production capacity of 72.28 million tons, accounting for 72% of the total production capacity, an increase of 6% compared to the previous year ； Production reached 65.7 million tons, accounting for 82% of the total output, an increase of 3% on a year-on-year basis. Gu Zongqin pointed out that the output from large-scale plants with a capacity of over 1 million tons per year was 44.15 million tons, accounting for 55% of the total output, with an increase of 6.2%. Large and efficient coal-to-methanol plants play a crucial role as the backbone of this industry. It is worth noting, however, that over the years the growth rate of this segment of production has remained around 9% to 20%, with 2022 representing the lowest value in recent years. Most plants with a capacity of over one million tons are associated with olefins, and the slowdown in their production growth is mainly due to declining profits in the olefins market.
Rising coal prices further squeeze methanol’s profit margins. Gu Zongqin analyzed that in 2022, the average price of methanol was 2,661 yuan per ton, representing a 5% increase on a year-on-year basis. This price level is not low compared to previous years; it is actually the second highest in the past decade. It is only 152 yuan per ton lower than the level seen in 2018, when the industry as a whole performed well. However, the profitability of enterprises varies greatly, resulting in a situation where methanol prices are high yet profits remain low. From a cost perspective, the main raw material for methanol production in China is coal, and coal prices have remained high since the second half of 2021. Taking bituminous coal as an example, according to statistics from the China Nitrogen Fertilizer Industry Association, the average price of bituminous coal at the factory gate in 2022 was 1,373 yuan per ton, representing a 20% increase on the high prices seen in 2021 – an increase that far exceeded that of methanol prices. The profit margin for methanol has become more negative, leading to further increases in losses; some coal-based methanol producers have been forced to suspend production, reduce output, or switch to other products due to the inability to bear the cost pressures. In comparison, the profitability of methanol produced from natural gas and coke oven gas is slightly better, as their share in production is only 15.3%, which is not sufficient to improve the overall profitability of the industry.
Imports of methanol have shown a slight increase. In 2022, China’s imports of methanol amounted to 12.192 million tons, an increase of 8.9% compared to the previous year. In the course of the year, imports were higher than in the corresponding period of 2021 for 8 months; the increase was most significant from April to August, with July reaching the highest level at 1.252 million tons. Gu Zongqin analyzed that the main reason is that during this period, the gas supply constraints on Iranian plants were alleviated, some of these plants resumed production, and production volumes and shipment levels remained high. Imports were lowest in February, which is also closely related to Iran’s gas restrictions. Among the countries from which methanol is imported, the Middle East, Southeast Asia, and the Americas remain the main sources; the top four countries are all in the Middle East – Oman, Iran, Saudi Arabia, and the UAE – accounting for 75% of total imports. Downstream demand is generally weak. It is understood that in the past two years, the growth rate of the total apparent consumption of methanol has slowed down, remaining around 4%; the apparent consumption volume in 2022 was 92.24 million tons. The slowdown in consumption growth is directly related to the lower economic efficiency of the methanol industry chain. Affected by the pandemic and macroeconomic conditions, the economic performance in the downstream consumption sectors of methanol remained weak in 2022. The pattern of downstream consumption of methanol has not changed much; olefin production from coal (methanol) remains the dominant method. However, the growth rate of capacity for olefin production from coal (methanol) has slowed down significantly in the past two years. Although three new plants with a combined capacity of 1 million tons per year came online last year, their operating load was not high. Methanol fuel has seen rapid development thanks to its unique environmental benefits and cost-effectiveness, ranking second; however, rising prices of methanol have to some extent restricted an increase in its consumption. Formaldehyde and acetic acid ranked third and fourth respectively, with new production capacity coming online in both cases; however, due to weak demand from downstream industries, the operating capacity remains low.