By Malini Hariharan
China's second coal-based monoethylene glycol (MEG) plant is due to start in the second half of 2012, reports ICIS news.
The plant, located in Hebi, Henan province, will have a capacity of 250,000 tonnes/year and will be operated by Wuhan Engineering, Haiso Technology, and Hebi Baoma Group.
The three companies successfully tested the technology at a 50,000 tonnes/year plant at the same site earlier this year.
Regular readers of the blog will remember an earlier post that had detailed the tremendous interest in China for this coal-based chemicals.
The first plant of 200,000 tonnes/year by Tongliao Jinmei Chemical started a while back but the blog understands that it is not yet running at full capacity. There have been quality issues which the company is attempting to resolve. A key problem is said to be in catalyst adsorption and coking when operating rate is raised.
The plant is now running at around 70%, up from below 50% in November, and cargoes have been shipped to East China.
While the Middle East ethane-based companies are the most cost-competitive MEG producers, Chinese coal-based players are likely to have a lower cost position than producers using naphtha as feedstock, says China International Capital Corp (CICC) in this report.
The cost of producing MEG from coal is likely to be around CNY4,500/tonne if plants operate at full capacity, says this report. That would result in a gross margin of more than 40% at a tax-excluded MEG price of nearly CNY8,000/tonne.
The cost for Chinese naphtha-based MEG producers is estimated at CNY6,000/tonne assuming WTI crude at $90/bbl but excluding credits from propylene and C4s.
This probably explains why Tongliao has started construction of a second MEG plant of 400,000 tonnes/year that is due to be completed in 2013.
There's certainly a huge local market available for Tongliao and other companies. China's MEG consumption is expected to hit 9m tonnes in 2011 with import dependency running at around 70%.