OUTLOOK ’13: Asia methanol seen rising as non-traditional use grows

03 January 2013 02:10  [Source: ICIS news]

By Heng Hui

Methanol prices may firm up in 2013 on the growth of non-conventional useSINGAPORE (ICIS)--Asia’s methanol prices may increase in 2013, underpinned by an expected strong demand growth from non-traditional applications in the key China market, industry sources said.

Methanol ended trading in 2012 in the range of $355-375/tonne (€270-281/tonne) CFR (cost & freight) Asia, according to ICIS data.

Innovative technologies in petrochemical production will translate to additional methanol demand of 2m-3m tonnes next year, industry sources said.

These new uses include the production of olefins, fuel cells, dimethyl ether (DME), gasoline derived from methanol, as well as the blending of methanol into gasoline.

While non-traditional demand is set to grow, only one new methanol plant is expected to come on line in 2013.

Azerbaijan Methanol Company (AzMeCo) aims to start operation of its 720,000 tonne/year methanol plant in the Garadag district of the capital city of Baku, in March 2013.

As Azerbaijan plant will supply to Europe it may free up Middle East cargoes to head into Asia but even that incremental methanol supply can be offset by the start-up of a single methanol to olefins (MTO) project, currently under construction in China, market sources said.

Methanol consumption from traditional consumers – such as formaldehyde, acetic acid, 1-4 butanediol, mono methacrylate (MMA), methylamines, and chloromethanes­ - is expected to grow in line with the global GDP but demand from non-traditional applications, on the other hand, is expected to increase at almost double speed.

The newest methanol-to-olefins (MTO) project, by Ningbo province’s Skyford Chemical, is scheduled to be started up in early 2013.

Some market players said the unit should be able to run more smoothly by the end of 2013.

MTO projects such as Shenhua Group (Baotou)'s and Datang International Power Generation's, took 1.5 years to achieve stable production, another market source said.

Other MTO projects could also have a huge impact on methanol requirements to the tune of a few million tonnes once the projects go commercial, said market sources.

The economic efficiency forecast of methanol-to-olefins/propylene will depend on the polymer prices, crude oil and coal – the main feedstock for Chinese methanol, market participants.

The continuation of trials of revived applications of methanol to gasoline (MTG), such as Jincheng Anthracite Mining Group (JAMG)’s 2,500 bbl/day MTG facility, which came on line in 2009, might also prove to be a new potential growth tool.

The group also executed a new MTG licence in Sep 2011 for 25,000 bbl/day of gasoline in Jingcheng Shanxi China.

Growth in the DME sector will be heavily dependent on governmental support and regulations.

DME production is expected to remain unchanged, as checks on DME blending into liquefied petroleum gas (LPG) become more stringent, prohibiting large quantities of blending and thus dampening DME production and methanol demand.

In the traditional use of methanol Asia after China is the next largest and most swiftly growing consuming region, said market sources.

Total demand outside of China is estimated at slightly less than 10m tonnes/year, and this growth is by investment in conventional methanol derivative productions such as polyacetal.

The trend towards downstream integration will continue, said a market consultant pointing out to the Saudi’s investment into a downstream acetyls project.

Market participants said the methanol outlook for next year depends largely on the regularity of supply from sources such as Iran, which has been hit by the UN sanctions, resulting in limited pool of customers which can transact with Iran.

Elsewhere in Asia, Korea and Taiwan usually follow the price trend of China while in southeast Asia prices are partly influenced by China as well as local demand-supply dynamics.

In India however, prices will be dependent on the frequency and quantity of Iranian shipments, said local traders.

Non Iranian suppliers tend to withdraw supply into India as the market has been flooded with cheaper priced material from Iran, according to market players.

India will increasingly become more reliant on imports since natural gas has been diverted to fertilizer and power generation in the country - both of which are high priorities compared to methanol production, Indian methanol producers said.

The current methanol demand worldwide stands at around 50m tonnes/year, with Asia taking around 70% of this share, according to market estimates.

($1 = €0.76)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Heng Hui
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