Chemical Profile: Asia methanol

15 August 2014 10:48 Source:ICIS Chemical Business

Methanol’s main uses are in formaldehyde, methyl tertiary butyl ether (MTBE) and acetic acid. Other traditional uses include in dimethyl terephthalate (DMT), methyl methacrylate (MMA), methylamines, chloromethanes, glycol ethers and methyl mercaptan. In recent years, growing applications in China are dimethyl ether (DME), fuel blending and methanol-to-olefins (MTO)/methanol-to-propylene (MTP). It also has many general solvent uses.

Overall domestic supply in China was estimated at around 39m tonnes in year 2013, with the overall effective operating rate being close to 70%. Meanwhile, the total effective operating capacity in southeast Asia, the Middle East and Oceania was estimated at close to 21.8m tonnes in the beginning of 2014.

China remained the largest consumer base in Asia. The total import volume during the first six months was at around 1.67m tonnes in 2014. At the same time, China continued to take arbitrage opportunities and re-export material to surrounding regions. The total exporting quantity from China was at around 29,000 tonnes in June and 492,000 tonnes in the first half of 2014.

Supply in Asia tightened going into the third quarter of 2014 following several production issues in the region. This, coupled with brief unplanned shutdowns in the Middle East, had provided a certain level of support in Asia prices despite the relatively high inventory level in China.

China’s Huadian Yulin Natural Gas Company shut its 510,000 tonne/year natural gas-based methanol unit from early July for over two months of maintenance and also shut its 600,000 tonne/year coal-based methanol unit at Yulin in Shaanxi province from the beginning of August for one month of maintenance. China’s Xinneng Energy shut its 600,000 tonne/year methanol unit at Dalad Qi in Inner Mongolia province on 20 July for 45 days of maintenance. China’s Qinghai Golmud Refinery Company shut No 2 300,000 tonne/year methanol unit at Golmud in Qinghai province in northwest China on 14 July for 45 days of maintenance.

Prices in northeast Asia peaked in end-2013/early-2014 on the back of supply tightness. This was due to several outages/shutdowns which happened concurrently for a number of major methanol producers in southeast Asia and the Middle East regions.

Spot prices have since decreased steadily as producers resumed their operation and touched the bottom in June 2014.

The majority of players are convinced that the methanol market is going on a stable-to-firm trend in the second half of 2014, citing both supply-demand fundamentals and traditional trade patterns.

Spot prices in China had been increasing slowly and steadily since they bottomed out in June 2014 and players see limited downside potential in spot prices for the rest of the year. In the spot market, a pricing structure remains so that a considerable amount of negotiations are still being held on a formula basis, as players wish to remain risk-averse.

Both Chinese domestic prices and futures prices listed on the Zhengzhou Commodity Exchange (ZCE) affect the sentiment and create volatility in the benchmark import prices in China. Futures markets provide another trading platform that involves lower costs, as the minimum volume required to trade is just 50 tonnes.

The majority of methanol is produced today from natural gas or coal. The two main processes are from synthesis gas (syngas) in a reformer and from methane by steam and catalytic autothermal reforming.

Another process uses coal, which is first reacted with oxygen and steam in a gasification reactor. Purified syngas is then compressed and fed to a reactor, where it is converted to methanol over a copper catalyst.

In China, coal-based production is the dominant method.

From a broader perspective, China, being the key driver of global growth in the methanol market, will see a slowing down in traditional downstream applications such as formaldehyde, acetic acid and methyl methacrylate. Those sectors are expected to grow in line with China’s GDP, which is estimated at 7% in 2014.

Demand from non-traditional sectors led by MTO/MTP and the energy sector, on the other hand, is expected to gather pace over the next one to two years.

The expected growth rate was close to 30-35% in 2014-2015.

By Yu Guo