Methanol: China key to upbeat forecasts

By Malini Hariharan

When it comes to methanol its all about China. Producers are expecting another strong year if Chinese demand remains robust.

China’s appetite kept Asian spot prices in the $200-410/tonne range last year and the expectation is for prices to hover between $300-400/tonne this year, writes my colleague Heng Hui, ICIS pricing methanol editor for Asia.

Chinese demand, running at around 18m tonnes, will be the key support factor.
The country already accounts for a little over 30% of global demand and offers the strongest growth potential in the formaldehyde, DME and gasoline blendng sectors.

Demand growth, which is generally estimated at over 20%/year on average, is widely expected to continue at the same pace as in 2010, writes Ross Yeo, ICIS pricing methanol editor for Europe.

China’s role will become even more critical once Methanex starts operations at its delayed 1.3m tonnes/year project at Egypt. The plant was originally due to start in Q1 2010 but is now under commissioning with volumes likely to flow in Q1.

Markets will also have to absorb nearly 3m tonnes of new capacity that was brought onstream during 2010. The full impact of this was not felt last year as the new plants were commissioned during shutdowns at other plants.

And China is also adding capacity – estimates for 2011 range from 2m to 6m tonnes. Total capacity last year was 27m tonnes.

However, the average operating rate was less than 50% in 2010 creating room for imports. The big question is whether imports will continue.

Source: CBI

Traditionally, Chinese coal-based methanol plants have run hard when prices are over $300/tonne. But a government move to restrict emissions last year resulted in reduced production even at high prices.

Production was also hampered by the redirection of feedstock natural gas to heating purposes during the winter season in China, as per the government’s mandate every year.

But the situation this year is still unclear and a rise in local production can easily put pressure on exporters.

“I think it could be a volatile year – Chinese production has to balance the market,” warns one producer.

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