By John Richardson
AT first glance, some of the facts relating to China’s methanol sector sound like Jabberwocky sounded to Alice when she firs discovered the language of that name in the marvellous Lewis Carroll novel, Alice Through The Looking Glass.
Here are some examples of what we are talking about, from our colleagues at Chemease:
- Demand for methanol reached around 36m tonnes tonnes in 2013 – up 16% from the year before. This was against total capacity of 62m tonnes/year, which had increased by 10% from the year before!
- Total domestic output was approximately 33m tonnes, meaning that imports happened despite the huge excess local capacity. Average local operating rates were in the mid-60% range because of poor economics.
- Fourteen million tonnes a year of methanol capacity is due to be added in 2014, which would leave total capacity at 76 tonnes/year.
But Alice, later on in same the novels, works out that you have to hold Jabberwocky up to a mirror, or looking glass, in order to read it backwards – and then it makes sense.
And so forget standard Western economic analysis of these numbers, which would point to the need for major consolidation and also, of course, immediate cancellation of all new projects.
You have to instead interpret this data through the mirror of China’s economic development.
Most of China’s existing and planned methanol capacity is in north and north western China, where per capita incomes are way below those in the east of the country.
The coal-to-methanol process accounts for some 70% of China’s methanol capacity. Coal mining is a crucial source of employment in China. Off-take by the methanol industry helps to keep many smaller mines operating.
Methanol is itself maybe a dubious value-addition to coal, given its oversupply. But if you go further downstream, the situation changes – for example, downstream to methanol-to-olefins.
Six MTO and methanol-to-propylene (MTP) plants are already on-stream in China with a further 14 –under construction, adds Chemease.
(Note: Most of this existing and planned capacity begins with local coal, but a few of the MTO/MTP units are based on imported methanol. This a separate story that we’ll cover in a later post)
Back to our main point: Coal-derived olefins are, of course, turned mainly into polyolefins – thus creating lots of jobs in plastics processing and other labour-intensive manufacturing industries.
And then there are all the other downstream methanol sectors, including, most notably, blending methanol into gasoline as a substitute for building more refineries based on imported oil. There is huge potential for further growth in methanol blending.
So methanol capacity might keep on growing for the sake of job creation in the less-developed provinces, where jobs remain the priority.
China might, as we discussed earlier this week, make use of methanol to move much-closer to polyolefins self-sufficiency than many people think.
What about the environment, though? The coal industry is a major polluter and is a major consumer of water - and China is short of water.
Greater recycling of water in the coal and coal-related industries, along with optimising cooling and ash handling systems in coal-fired power plants, could make a huge difference, says Li Zheng, professor in the Department of Thermal Engineering at China’s Tsinghua University.
“With these measures, the targets for water consumption set by the State Council may be achieved to allow the sustainable development of China’s coal industry,” adds Li in this article in Cornerstone – the coal industry magazine.
Where there is a political will in China, there is often a way.