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Insight | Time: Jan 18 2017 9:02AM
China's methanol availability in 2016 and forecast for 2017
 
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In the year of 2016, China’s demand for methanol grew steadily with Shenhua Yulin and China Coal Mengda starting their new methanol-to-olefins plants. In the meantime, methanol supply posted stable growth as well. Let’s have a glance at supply availability from the perspective of domestic production and imports in 2016.

Domestic methanol production

Chart 1. Monthly methanol production in 2015-2016

According to the data released by National Statistics Bureau, domestic methanol production totaled 39.219 million tons in January-November 2016, up 7.4% year-on-year; and is expected to reach 3.7 million tons in December, a combined volume of 42.919 million tons over 2016. The year-on-year growth of production maintained above 6% for most months. Domestic methanol production increased because that capacity expanded by 7.16 million mt/year in 2016, and some producers restarted their lengthy idled plants on higher margins, producers including Chongqing Carbinol, Jiuyuan Chemical, Zhongxin Chemical, Datuhe Coking, Berun Group, etc.

Figure 1. Natural gas-based methanol production plants slated to restart in 2017
Company Location Methanol capacity (kt/yr) Status
Luzhou Natural Gas Chemical Sichuan 150 Restarted in early Jan
Qinghai Guilu Qinghai 800 Restarted on Jan 15
Dazhou Steel Sichuan 200 To restart around Chinese New Year in end-Jan
Qinghai Zhonghao Natural Gas Chemical Qinghai 600 To be decided after Chinese New Year
Berun Group Inner Mongolia 400 To restart around Chinese New Year in end-Jan
Total   2150  

Domestic production is poised to increase continuously in 2017. Some natural gas-based methanol production plants were slated to restart as the profits were attractive. Luzhou Natural Gas Chemical and Qinghai Guilu led this wave of restart by recovering the production of their 150kt/year and 800kt/year plants respectively in early January. In addition, Dazhou Steel, Zhonghao Natural Gas Chemical and Berun Group also have schedules to turn on their plants around the Chinese New Year holiday, with the production earmarked to sell in Southwest and Northwest markets.

Moreover, another 5 million mt/year of new capacity is expected to be on stream in 2017, of which 3.2 million mt/year of capacity projects to sell products in Shandong and neighboring markets.

Figure 2. Upcoming methanol capacity in 2017
Company Location Feedstock Capacity (kt/yr) Startup
Jiajing Magnesium Industry Inner Mongolia Coke oven gas 300 H1 2017
Xinneng Phoenix Shandong Coal 200 H1 2017
Mingshui Dahua Shandong Coal 600 H1 2017
Hualu Hengsheng Shandong Coal 1000 H2 2017
Jinshi Chemical Hebei Coal 100 2017
Luxi Chemical Shandong Coal 800 2017
Anhui Linhuan Anhui Coke oven gas 200 2017
Zhongtian Hechuang 2# Inner Mongolia Coal 1800 2017
Total     5000  

China’s methanol imports

Chart 2. Monthly methanol imports in 2015-2016

Total methanol imports are expected to amount to 8.8 million tons in 2016, up 59.1% year-on-year. The imports surged considerably in May-August, registering growth higher than 50%. On the one hand, the arbitrage window to trade products from inland to East China was closed due to higher demand in inland China. Buyers in East China preferred to buy low priced imported cargoes. On the other hand, producers in the US and Southeast Asia were seeking outlets in China as supply was more than enough in the US and demand kept shrinking in Southeast Asia.

China’s methanol imports are likely to continue growing in 2017. Demand is rising fast in East China with two new methanol-to-olefins plants having started production. The larger appetite for methanol is mostly sated by higher imports as new methanol capacity has not yet been on line. Though capacity expansion is delayed in Iran and North America, methanol plants in South America may ramp up production and export products to China, as they have renewed contracts for natural gas supply.

In a conclusion, the growth of demand for methanol depends on Fund Energy’s second MTO plant and Sailboat Petrochemical’s MTO plant, with a combined requirement for 3.5 million mt/year of methanol feedstock. Meanwhile, domestic methanol capacity is expected to increase by 3.2 million mt/year (excluding those plants integrated with downstream MTO units), and another 2.15 million mt/year of capacity is to be back on line. Supply-demand may maintained largely balanced. The belated methanol capacity expansion may lead to domestic supply deficit, but it can be offset by increase in imports. It is suggested to focus on whether methanol plants can start up as scheduled and how much the imports will increase.

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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