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Insight | Time:Jun 13 2018 11:12AM
Methanol-to-olefins producers feel the pain
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The demand for methanol has been increasing rapidly in China, especially from new downstream applications with coal-, methanol-to-olefins projects springing up in recent years. As of now, demand for methanol from CTO/MTO accounts for 50% of the total. Methanol was once oversupplied in China, but now the demand-supply situation is balanced as several new methanol plants both domestic and abroad are postponed, leading to rise in methanol price.

The gains in methanol price has brought pressure on downstream derivative producers. The cost of methanol-to-olefins has increased notably since the latter half of 2017. Profit margins are crunched, especially for those MTO producers who purchase merchant feedstock for production.

China’s 2018 spring turnaround season began in Mar, and overseas plant shutdowns were heard frequently. In addition, the startups of new methanol plants were delayed. After a short period of respite in the beginning of Mar, MTO producers started to feel the pain, as cost rose. One MTO plant in East China, for example, saw the profit margin dropping to -1,000yuan/mt in Apr-May. Due to the poor economics, several MTO plants based on merchant feedstock were closed for maintenance, plants including Yangmei Hengtong, Zhongyuan Ethylene, Ningbo Fund, Nanjing Wison and Zhejiang Xingxing. As a result, methanol price pulled back, hence the cost for MTO producers dropped.

As of now, Yangmei Hengtong and Nanjing Wison have restarted their plants. However, the restarts of Zhongyuan Ethylene’s and Ningbo Fund’s MTO plant could get delayed again.
Company Location MTO capacity (kt/yr) Integrated downstream Status
Yangmei Hengtong Shandong 300 PVC, propylene Shut on May 2, restarted on May 20
Nanjing Wison Jiangsu 295 Ethylene, propylene Shut on May 22, restarted in early Jun
Zhongyuan Ethylene Henan 200 PP, PE Shut on May 5, restart delayed to Jul
Ningbo Fund Zhejiang 600 MEG, PP Shut on May 5, to restart on Jun 22
Zhejiang Xingxing Zhejiang 600 PP, MEG EO Shut on May 25, to restart on Jun 25

Though most domestic methanol plants have ended turnaround, production and plant inventory remain restricted. Meanwhile, shipments are limited despite that plants in Middle East and Southeast Asia are restarted, and methanol plants in Europe are shut heavily. The freight to transport domestic materials to coastal regions is high, and imports have not fully recovered. Therefore, methanol price is unlikely to correct sharply in China. Supply could tighten and MTO producers could continue to feel the pain if MTO plants mentioned in the table above are to restart.

Company Location Methanol capacity (kt/yr) Status
Statoil Norwegian 900 Shut in mid-May, restart undecided
BioMethanol Netherlands 500 Shut in early Jun for 1 month
Shell Germany 400 Shut in early Jun for 1 month

New methanol projects in China to come online are often combined with MTO facility, so domestic methanol supply increase could remain restricted. The deficit relies on methanol imports, and China’s methanol price is unlikely to decrease drastically if overseas new plants are put off repeatedly.
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