Feel free to leave comments – Key Events in Methanol in 2015

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Review of China’s methanol industry in 2015: In 2015, the growth rate of methanol production capacity in China slowed down significantly. As of December 23, China’s effective methanol production capacity was approximately 69.76 million tons, representing a 1.68% increase from the previous year and the lowest level on record. Since 2000, the rate of growth in China’s methanol production capacity has seen a decline every 3–4 years on average, and this year the slowdown in production growth rate has reached a record low. 　　2016 was the starting year of the 13th Five-Year Plan, and the growth rate of methanol production capacity in China is likely to continue to slow down. However, next year will surely be a crucial year for further deepening reforms within the industry as well as for its transformation and upgrading! 　　The traditional downstream sectors for methanol lack sufficient development, while new downstream applications continue to show strong demand. In China, there is generally an overcapacity issue in the traditional downstream sectors for methanol, and most of these products are undergoing capacity reduction this year. In recent years, as traditional downstream consumption has declined, the share of consumption for new types of downstream products, such as olefins produced from coal (via methanol), has been increasing year by year since 2010. It is estimated that by 2015, such applications will account for over 30% of the demand for methanol, making them the most important downstream uses for this substance at present. It is worth noting that with crude oil prices remaining low, China’s MTO/MTP sector continues to face difficulties in breaking out of its predicament. 　　Lower natural gas prices at year-end bring some relief to methanol producers reliant on gas On November 18, the National Development and Reform Commission issued a notice stating that it had decided to reduce the price of natural gas supplied to non-residential users starting from November 20, 2015, by 0.7 yuan per cubic meter. This reduction in gas prices has alleviated the cost pressures on enterprises to some extent, but gas-related companies in many areas are still operating at a loss. 　　Crude oil prices have remained volatile at low levels; with the increasing role of methanol as an energy source, its prices are likely to stay at these low levels on a regular basis. According to reports from JinYinDao, the sharp drop in crude oil prices in the second half of 2014 led to a rapid change in the market situation for methanol, with the East China methanol market entering an era where prices were above 1,000 yuan per ton. The volatile low levels of crude oil prices in 2015 meant that, from the beginning of that year until now, methanol prices in East China were below 2,000 yuan per ton for about 40% of the time. 　　The connection between the interior regions and ports is gradually weakening, and imports of methanol are returning as new downstream demands emerge. The East China region, being the area with the highest methanol consumption in China, has a low supply level there ； Due to the huge demand, it has been attracting a continuous influx of both domestic and imported goods in recent years. 　　Since 2014, the methanol market in China has shown distinct regional trends. Additionally, new coal (via methanol) to olefins production projects have been launched in regions such as Shandong and the Northwest, which means these areas have a certain demand for domestically produced methanol, thereby gradually reducing the connection between the interior areas and the ports. In the future, there will continue to be new methanol-to-olefins projects coming online at ports, and it is expected that imports of methanol will gradually increase as new downstream demands arise. 　　The profitability of products in the methanol industry chain is poor, putting further pressure on the operations of related companies. With weak performance in external markets, the profitability of methanol and its downstream products in China has remained average this year. In addition to most products being unprofitable, the companies faced various pressures related to environmental regulations, restructuring, and funding; as a result, the operating pressures on most enterprises in this industry increased in 2015. In addition to increased operational pressures, most chemical companies face issues such as environmental protection. 　　The concentrated release of international production capacity and the potential lifting of economic sanctions on Iran are leading to changes in the supply and demand dynamics in the international market. With a peaceful resolution to the nuclear negotiations in Iran, Western countries will gradually lift their economic sanctions against Iran. Apart from the significant impact that Iranian crude oil has on the international crude oil market, methanol, which is often referred to as \"mini-crude oil,\" has also had a slight influence on the structure of the international market. 　　It is reported that before the nuclear economic sanctions on Iran, the country had annual export shipments to Europe amounting to about 800,000 tons, and these levels are expected to be restored once the sanctions are lifted. The influx of Iranian goods into the European market, where supply and demand are currently relatively balanced, will inevitably take up space from the existing goods originating from the Middle East, Africa, and Iran. As a result, not only will the focus of the European market shift, but some of those goods may also be directed to the Chinese market, leading to a slight adjustment in the sources of methanol imported into China. Restructuring of Datang Coal Chemicals As early as July 2014, Datang Power Generation announced that it had signed a restructuring framework agreement with Guoxin Company to restructure its coal chemicals business unit, as well as the related projects and supporting and associated initiatives. At present, the coal chemical business under Datang Power mainly includes the Dolun Coal Chemical Project, the Keqi Coal-to-Natural Gas Project, and the Fuxin Coal-to-Natural Gas Project. As of December 2015, the restructuring efforts related to the coal chemical sector projects initiated by Datang International Power Generation Co., Ltd. in 2014 had not progressed smoothly. 　　The highly anticipated buyer, Shenhua Group, was only interested in one of the five coal chemical projects that Datang offered for sale as a package. However, the proposal was put on hold due to difficulties in reaching an agreement regarding asset impairment issues. 　　There are reports that another option is under consideration: Datang Power, Shenhua Group, and China State Capital Investment Corporation would jointly form an entity to manage coal chemical projects. One of the conclusions reached by the central inspection team during its inspection of Datang Power in 2015 was that blind investment in industries other than power generation had resulted in a large amount of inefficient and ineffective assets. The Fuxin coal-to-gas project, whose cumulative investment has reached 14 billion yuan, may serve as a typical example of Dataneng Power’s reckless investments. 　　Xinjiang’s Environmental Protection Department imposes successive penalties on coal chemical projects Reports from April this year indicate that, over the past three quarters, Xinjiang’s Environmental Protection Department has issued penalties to coal chemical projects in the region for issues such as illegal construction and environmental pollution. Fines ranging from 100,000 to 500,000 yuan are imposed, and the cases are made public online. Although the penalty amount is small, the alarm for environmental protection remains loud. 　　The companies involved are: Yili Xintian Coal Chemical Co., Ltd., Yili Xintian Coal Chemical Co., Ltd. (required to make corrections within a set time), Xinjiang Qinghua Energy Group Co., Ltd., Yankuang Xinjiang Coal Chemical Co., Ltd., Yitai Yili Energy Co., Ltd. (required to make corrections within a set time), and Xinjiang Yihua Chemical Co., Ltd. (required to make corrections within a set time). 　　Some methanol manufacturers in Shaanxi were found to be in violation of environmental regulations. In the middle and late March, the Shaanxi Provincial Environmental Protection Law Enforcement Bureau discovered that 10 enterprises in the province were committing environmental violations to varying degrees. On March 17, the Provincial Environmental Protection Department made public the environmental violations committed by these 10 enterprises, and took measures such as ordering them to suspend production, halt construction, and impose heavy fines on them. It is understood that these are the first batch of environmental violation cases handled in Shaanxi since the implementation of the newly revised Environmental Protection Law. 　　It is reported that the 10 companies subject to investigation this time are Shaanxi Changqing Energy Chemical Co., Ltd., Shaanxi Dongling Smelting Co., Ltd., Shaanxi Meixin Industrial Investment Co., Ltd., Pucheng Clean Energy Co., Ltd., Shaanxi Jintai Chlor-alkali Chemical Co., Ltd., Shaanxi Yulin Kaiyue Coal Chemical Co., Ltd., Yanzhou Coal Industry Yulin Energy Chemical Co., Ltd., Ziyang Yanghua Coal Mine, Shangluo BYD Industrial Co., Ltd.’s third-party operator, Guangzhou Environmental Protection Technology Equipment Company’s Shangluo branch, and Shaanxi Coal Chemical Energy Co., Ltd. 　　Sinopec Great Wall Energy intends to build a coal-to-methanol production facility in Indonesia. Sinopec possesses core technologies with independent intellectual property rights in the field of coal chemical engineering, as well as experience in designing, constructing, and operating large-scale coal chemical projects. Given Indonesia’s abundant coal and water resources, Sinopec is considering seeking capable coal enterprises in Indonesia to work together on the development of coal chemical industries for the production of coal-derived methanol. 　　The Indonesian HUMPUSS Group has experience in coal mining, trading, methanol production, and sales. It operates Indonesia’s only large-scale natural gas-to-methanol facility in East Kalimantan, with an annual production capacity of 660,000 tons. The HUMPUSS Group owns the MMKU open-pit coal mine in East Kalimantan Province, with resources amounting to approximately 2 billion tons, of which around 1 billion tons are proven reserves. The Indonesian HUMPUSS Group proposed a partnership with Sinopec to utilize the resources of the MMKU open-pit coal mine to build a coal-to-methanol project, and located a site for the project near that coal field. 　　Yuhuang Chemical to Build a World-Class Methanol Plant in the U.S. On the morning of September 18th, local time in the U.S., Shandong Yuhuang Chemical officially laid the foundation for its methanol production facility in Louisiana. Yuhuang Chemical also became the first Chinese company to make direct investments in Louisiana. 　　It is reported that the methanol project of Yuhuang Chemical in Louisiana, United States, covers an area of about 1,300 acres, with the first phase of construction expected to be completed and put into operation by the end of 2017. Unlike domestic coal-based methanol production, the raw material for Yuhuang Chemical’s methanol project in Louisiana, USA, is natural gas. In recent years, the continuous development of shale gas in the United States has alleviated the shortage of natural gas, leading to a significant drop in U.S. natural gas prices. Yuhuang Chemical invested in building a factory in the United States precisely because of this resource advantage. 　　Yangmei takes a stake in Jutai’s methanol-to-olefins project. In December, Yangmei Chemical Co., Ltd. issued a statement stating that its wholly-owned subsidiary, Shanxi Yangmei Chemical Investment Co., Ltd., plans to invest around 1 billion yuan to acquire 25% of the shares in Jutai Energy Inner Mongolia Co., Ltd., which are held by Shandong Jutai Energy Co., Ltd. Previously, Huadong CNC planned to issue shares at a price of 8.87 yuan per share to all shareholders of Inner Mongolia Jutai in order to acquire 100% of their shares in Inner Mongolia Jutai; however, the acquisition was aborted in November. 　　According to previous announcements, the funds raised will be primarily used for the Jutai Zhungeer 600,000-ton methanol-to-olefins project. Jiutai Energy Inner Mongolia Co., Ltd. began construction of a 600,000-ton methanol-to-olefins project in March 2013, with a total investment of 8.28 billion yuan; the project was scheduled to be completed and put into operation by 2015. It can produce 600,000 tons of olefins per year, 60,000 tons of butadiene, 125,000 tons of butylene, 6,000 tons of MTBE, and 60,000 tons of petroleum products and liquefied petroleum gas. 　　It is reported that as of the first half of 2015, 80% of the total work for this project had been completed. 　　After the heavy fine imposed on Shaanxi Coal Energy, Shaanxi Coal and Chemical Energy Co., Ltd., which came under widespread attention due to its \"exorbitant\" environmental protection fine of 15.8 million yuan, has now paid the fine and entered the trial operation phase. Cao Qunxing, the office director of the Changwu County Environmental Protection Bureau, confirmed to the reporter that Shanxi Coal Energy completed the procedures for trial operation in July; it is currently in the trial production phase with equipment still under adjustment, and the trial production period will expire on December 20, 2015. 　　Li Qingwei, general manager of Shanxi Coal Energy, said later that the company had completed the procedures with the relevant authorities at the end of June to change the end product, from dimethyl ether to methanol ； And trial production begins after approval by the relevant departments; if the equipment still requires adjustment upon the end of the trial production period, an extension of that period may be requested. http://www.chinastock.com.cn/yhwz_about.do?methodCall=getDetailInfo&docId=5181991