China’s methanol economy

By Malini Hariharan

China is well set to take on an even larger role in the global methanol industry. The country already accounts for a little over 40% of demand and its share is set to expand rapidly in the coming years.

The blog recently caught up with Ken Yin, the China methanol markets editor at Chemease for an update on future prospects.

Ken expects Chinese demand to touch 24m tonnes this year as against 20m in 2010. There is plenty of local capacity – estimated at 42m in 2010 which is likely to reach 50m by the end of this year.

Companies are rushing to start up new plants in anticipation of demand for from the dimethyl ether (DME), gasoline blending and methanol-to-olefin (MTO) sectors.

These three end-uses will be the key drivers to Chinese methanol demand in the future with only moderate growth coming from the traditional end-user sectors of formaldehyde and acetic acid.

DME has seen some hiccups this year as the Chinese government clamped down on its use in LPG blending because of safety issues. But it has started drawing up national standards for DME use with LPG and also specs for the gas cylinders. These are likely to be ready by June 2012.

And DME could emerge as a much bigger play if producers are successful in their trials of using pure DME as a household fuel, points out Ken.

Methanol use in gasoline blending is also ready to take off once the government introduced national standards. These were due last year but were delayed as trials were not completed.

The government is widely expected to introduce a M15 national standard this year which will allow 15% blending of methanol with gasoline. Some provinces have carried trials of 85% blends but The M15 blend is the most favoured as it does not require retrofitting of engines.

Methanol use in gasoline blending and DME is projected to grow by 30%/year. The figure could be higher if government speeds up implementation of new standards.

But the industry is likely to see resistance for state-owned refining companies such as Sinopec as increased use of methanol in gasoline blending or blending DME with LPG would affect its sales.

China’s methanol economy is gradually taking shape and no doubt providing ideas to other countries around the world.

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