China methanol usage to surge as new fuel standards take effect

By Heng Hui

SINGAPORE (ICIS)–China’s methanol consumption will get a strong boost with the expected implementation of a new fuel blending standards in the country by the end of the year, industry source said on Thursday.

Its usage of the chemical as a transport fuel is expected to double to 8-9m tonnes/year by 2015 from 2012, with a share of 13-16% to China’s overall methanol consumption, if the government’s plan of mandating a 15% methanol blend on gasoline – M15 – pushes through this year, they said.

The M15 plan is incorporated in China’s 12th five-year plan as part of its strategy to minimise dependence on oil imports, while promoting use of a more environmentally friendly fuel, but no official schedule was set for its implementation.

In the municipality of Shanghai, as well as in Shanxi province, trial projects are underway in which some buses are being run on 100% methanol, industry sources said, citing that the alternative fuel is much cheaper than gasoline.

Methanol is priced at around CNY (yuan) 2,800/tonne ($451/tonne) ex-tank, while a 90-RON gasoline costs CNY 7310/kl, which is roughly equivalent to CNY5,409/tonne.

But gasoline has a much higher calorific value than methanol, industry sources said.

An expected increase in methanol consumption because of the new fuel blending standards will likely push up spot prices of the chemical that could be detrimental to its major downstream markets, namely, formaldehyde and acetic acid, industry sources said.

Methanol prices had risen so much that some acetic acid producers in northeast Asia had to temporarily shut production because of their inability to pass on the high production costs to the end-users, they said.

Methanol is also used as a fuel additive in methyl ethyl butyl ether (MTBE) and in dimethyl ether (DME).

Across different provinces in China, methanol blends on fuel in varying degrees – ranging from 5-100% – are being adopted, supporting expectations of strong consumption in the coming years.

High oil prices are providing the impetus to revive the methanol-to-gasoline (MTG) process in China, industry sources said.

In Shanxi province, Jincheng Anthracite Mining Group (JAMG) has an existing 2,500 bbl/day MTG facility, which came on stream in 2009. The company had acquired a license in 2011 to build a much bigger facility but the project has yet to materialise because of lack of government support, industry sources said.

A growing trend in other parts of Asia on the use of biodiesel in transport fuel is also expected to boost  methanol consumption in the region.

Methanol is required in the production process of palm-based biodiesel.

The Philippines is expected to increase the required biodiesel blend in transport fuel to 5% in 2015 from 2% currently. Malaysia, on the other hand, is due to implement a 10% biodiesel blend by June 2014 from 5% currently.

($1 = €0.78)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections