Overview of the Development of the Methanol-to-Olefins Industry in East China

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The East China region is the largest consumer of methanol in China, but its local production capacity ranks third from the bottom nationwide. Taking 2014 as an example, the methanol production capacity in that region was 4.8 million tons, accounting for 7% of the national total ； The output is approximately 1.6486 million tons, accounting for 7% of the national total ； It is understood that in the Jiangsu and Zhejiang regions, relying on their coastal resources, the supply of methanol mainly comes from overseas imports. Following the 2008 financial crisis, a large volume of imported goods flowed into our country and occupied the coastal cities, being distributed across various ports along the Yangtze River. The commissioning of Ningbo Fude’s plant with an annual production capacity of 600,000 tons of olefins in 2013 marked the beginning of the development of methanol-to-olefins projects in East China. Subsequently, Nanjing Huisheng’s 300,000-ton-per-year MTO plant and Zhejiang Xingxing New Energy’s 690,000-ton-per-year MTO plant were also put into operation. By September 2015, the total annual production capacity of MTO plants in East China had reached 1.59 million tons. Apart from Nanjing Huisheng, which had its own auxiliary facilities, Ningbo Fude required 1.8 million tons of methanol per year, while Zhejiang Xingxing needed 2.07 million tons per year – all of which had to be sourced externally. This created a huge demand gap that had a significant impact on the logistics of the methanol market as well as on its supply and demand dynamics. For example, in 2013, there was an increase in the transport of goods from northern ports to southern ports in the Bohai Sea region, as well as a surge in import volumes at ports such as Ningbo and Jiaxing. Since the beginning of 2015, most methanol-to-olefins projects at ports have been operating normally ； Since the third quarter, some units have been shut down for maintenance, resulting in a decline in overall production capacity. Since 2015, the commissioning and operation of coal (via methanol) to olefins projects in major production areas such as the Northwest and Shandong have led to a reduction in goods exports from these regions. Meanwhile, gas-based enterprises in the Southwest operate at lower capacity due to cost pressures; all these factors have resulted in a sharp decline in goods arriving at ports in East China this year. In the future, there will be many MTO/MTP and MTG projects coming online in East China (such as Zhejiang Zheneng’s MTG project, Changzhou Fude’s MTO project, and Jiangsu Shenghong’s olefin project), so demand for such goods will continue to rise. As a result, businesses will turn their attention more towards imported goods. It was on this basis that port imports increased significantly in 2015. At the beginning of 2015, China’s MTO projects were profitable, with profits exceeding 1,000 yuan at certain times ； However, since March, against the backdrop of persistently low international crude oil prices, the advantages of the oil-based route have increased significantly ； With the prices of raw materials and downstream products remaining low, projects that use externally sourced methanol to produce olefins have limited competitiveness. A certain MTO project in China operates at a theoretical loss; although it reaches break-even point at certain times, such projects remain loss-making at present. During this period, although some companies were able to offset part of their losses through profits from other products, it is evident that the operational pressures on these companies are increasing further. Unlike the methanol-to-olefins plants in the inland areas, the organic chemical industry in the southeastern coastal regions is highly active, offering great potential for development. By achieving higher levels of refinement in the methanol-to-olefins products produced in East China, companies can enhance their competitiveness ； Moreover, the availability of water resources is relatively high, which is conducive to industrial development. Next, let’s take a closer look at the extension of the industrial chains of methanol-to-olefins enterprises in East China. Ningbo Fude Energy Co., Ltd. is a subsidiary of Shenzhen Qianhai Fude Energy Investment Holding Co., Ltd. It was formerly known as Ningbo Heyuan Chemical Co., Ltd., and Fude Energy officially took over control of it in September 2013. Located in the Chemical Industry Zone of Ningbo, Zhejiang, with a total investment of around 6 billion yuan, it adopts the DMTO process developed by the Dalian Institute of Chemical Physics. The project was launched in June 2010, and successful trial operation took place at the beginning of 2013. Nanjing Huisheng is a subsidiary of the Huisheng Group. Located in the Nanjing Chemical Industrial Park, its MTO plant with an annual production capacity of 300,000 tons came online in September 2013; it was the world’s first industrial MTO facility to utilize Honeywell UOP’s advanced methanol-to-olefins technology. Zhejiang Xingxing is a subsidiary controlled by China Sanjiang Fine Chemicals Co., Ltd. The company is located in the Economic Development Zone of Jiaxing Port Area, Zhejiang Province. The project’s groundbreaking ceremony was held on October 18, 2012, and the EPC contract for the main production facilities was signed on March 8, 2013. Completion of the project was planned for the end of January 2015, with operation starting in April 2015. Introduction to newly added projects later: Changzhou Fude: It is a subsidiary of Shenzhen Qianhai Fude Energy Investment Holding Co., Ltd., and is located in Changzhou, Jiangsu. The company has built a facility for the production of olefins from methanol, with an annual capacity of 330,000 tons; it consumes 1 million tons of methanol per year. The DMTO process developed by the Dalian Institute of Chemical Physics has been used in the construction of this facility, which is now ready for operation. It is expected that the facility will start producing in September. The sources from which the methanol will be purchased will be similar to those used by Ningbo Fude – both imported and domestic products will be considered. Jiangsu Sierbang: Jiangsu Sierbang Petrochemical Co., Ltd. is a wholly-owned subsidiary of Shenghong Group. It is located in the Chemical Industry Park of Xuwei New Area in Lianyungang City, Jiangsu Province, where it focuses on the development of alcohol-based cogeneration projects. This project is a modern, world-class large-scale petrochemical facility that uses methanol as raw material; through the Methanol to Olefins (MTO) process, it produces ethylene and propylene, which are then used to manufacture downstream derivatives. The project covers a total area of 350 hectares, with a total investment of 23.5 billion yuan. Upon completion of the project, it is expected to generate annual sales revenue of around 30 billion yuan. The company’s first-phase project, with an annual production capacity of 600,000 tons of olefins, is scheduled to go into operation by the end of 2015. It is reported that the company will adopt a reverse approach, purchasing propylene externally first, with the plan to start producing methanol in the first quarter of 2016. The company does not have its own methanol production facilities; therefore, the 1.8 million tons of methanol required annually must be purchased externally, with purchases coming from both imported and domestic sources. In addition, the 100,000-ton-per-year methanol-to-gasoline production facility in Zhejiang Zheneng is being built in an orderly manner. Demand for methanol in East China is also expected to rise steadily in the future. However, international oil prices will have a significant impact on the profitability of the methanol-to-olefins industry, and thus the progress of this facility’s commissioning will also be affected by them.