In China, the methanol-to-olefins (MTO) /methanol-to-propylene (MTP) sector is the fastest growing downstream application. Other relatively new applications include dimethyl ether (DME) and fuel blending.
For 2015, the overall domestic supply in China was at 44m tonnes, while the effective operating rate hovered at 65-70% most of the year. The effective operating capacity was around 65m tonnes in China, and 22m tonnes for Southeast Asia, the Middle East and Oceania combined.
China was the largest consumer base in Asia with imports in 2015 of 5.54m tonnes. Exports decreased significantly in 2015 to just 16,000 tonnes.
Overall domestic demand in the key China market was at 48.45m tonnes in year 2015.
Yearly demand for other northeast Asia regions was estimated at around 4.5-5m tonnes while demand Southeast Asia was roughly 2.6m tonnes.
Into 2016, the methanol market has witnessed a change in trade flows, largely unseen in the past, with China methanol spot prices becoming increasingly attractive to producers in the US and South America.
In 2015, US methanol capacity surged by 76.5% with the addition of around 3.5m tonnes/year of new capacity brought on stream.
The first quarter of 2016 saw significant import volume from Europe and the US. Identified March loading material from the US Gulf and South America to Far East/China was 178,000 tonnes.
Although the arbitrage window closed shortly after, the methanol market is looking forward to the next window to be opened following the start-up of the new MTO facilities in Q4 2016/Q1 2017.
Spot prices in the key China market continue to lead the methanol price trend in the rest of Asian. In China, prices trended down after peaking in April 2015 before stabilising and fluctuating within a narrow range in the second quarter of 2016.
On a day-to-day trading basis, import prices in China continue to be under strong influence from the China domestic prices and futures prices listed on the Zhengzhou Commodity Exchange (ZCE).
The futures market provides another trading platform and involves lower costs, with minimum volume at 10 tonnes.
In other regions, players have been keeping a close eye on the price trend in the benchmark China market.
Prices gaps between regions within Asia narrowed going into 2016, given the changes in trade flow and a more significant role China has been playing in the methanol spot market.
The majority of methanol is produced 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 remains the dominant method.
China will continued to see a slowdown in growth in the traditional downstream applications such as formaldehyde, acetic acid and MMA. Those sectors are expected to grow in line with China’s GDP. China’s Q2 2016 GDP growth rate was announced at 6.7%.
Meanwhile, demand from non-traditional sectors led by MTO/MTP and the energy sector, is expected to continue to increase.
In 2015, 1.75m tonnes of new MTO/MTP capacity was brought on stream, lifting China capacity to 8.52m tonnes/year. Another 3.64m tonnes/year is slated to be brought on line in 2016.