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Methanol set for a strong year

China, Markets, Olefins
By John Richardson on 11-Jan-2012

By Malini Hariharan

Chinese methanol demand growth in 2011 has beaten expectations thanks to rising requirement from the gasoline blending and methanol-to-olefins (MTO)/methanol-to-propylene (MTP) segments.

Demand last year is estimated to have expanded by an impressive 30% to reach 26m tonnes, well above earlier forecasts of 19% growth, according to Ken Yin, the methanol editor for China.

Most of the growth was captured by increased local production with import volumes holding steady at around 5.7m tonnes.

The outlook for 2012 is robust with demand projected to hit 31m tonnes driven once again by gasoline blending, start of new MTO/MTP plants and also dimethyl ether (DME)

The strength in Chinese demand should support higher product prices across Asia, writes Heng Hui, ICIS pricing editor covering the Asian methanol market.

Market participants expect prices to hover in the range of $350-450/tonne CFR Asia this year – higher than the $300-415/tonne CFR Asia range seen in 2011.

But spot prices are likely to be volatile during the year. Asian buyers have been reluctant to sign contracts with Iran after the latest round of sanctions by the US and this is likely to force Iranian producers to sell on spot basis.

Additionally, the introduction of futures trading on the Zhengzhou Commodity Exchange (ZCE) is also expected to contribute to spot market volatility.

Another factor that is likely to support higher numbers in 2012 is the lack of capacity additions outside of China. New plants continue to be built in China and total Chinese capacity is estimated to hit 55m tonnes at end-2012, up from 50m at end-2011. But luckily for global producers, the country will still need to import more than 6m tonnes this year.