MOSCOW (MRC) -- Worldwide demand for methanol is forecast to expand at rates below GDP growth for the first time, reported Chemweek with reference to Mike Nash, vice president/syngas chemicals at IHS Markit.
Speaking on Tuesday in a panel session at the 38th World Methanol Conference, being held by IHS Markit in a virtual format, Nash said that global methanol demand is predicted to grow on average 2.8%/year during the next 10 years, lagging world GDP growth of 3.2%/year. The methanol market is “at a turning point,” Nash said.
The current and forecast lower crude oil price means less demand for methanol from the fuels industry, according to Nash. Meanwhile, low crude prices are helping to weaken the economics of methanol-to-olefins (MTO) production. Growth in MTO capacity in China has kept methanol demand growth above GDP growth in recent years, Nash said. MTO plants have operated at high rates and generated high margins in 2020, but there is “a challenging time to come,” he said.
Utilization of MTO plants in China has averaged about 80% between January and November 2020, equivalent to about 1.25 million metric tons of methanol consumption per month, said Xiaomeng Ma, director/methanol and base chemicals at IHS Markit in the panel session. “There has been healthy methanol demand into MTO,” she said.
However, the crude oil price crash early in the COVID-19 pandemic and persistently soft prices since then have weakened the relative profitability of MTO facilities. MTO units are relatively high-cost plants in an environment of low crude oil prices, Nash said. “MTO is at the top end of the ethylene/propylene cost curve,” Nash said. This is exacerbated by the large volumes of ethylene and propylene capacity coming onstream at steam crackers and propane dehydrogenation units around the world. “MTO economics will be challenged in the coming years,” he said.
IHS Markit forecasts that operating rates at MTO facilities will fall to just below 70% in 2022 and stay low in the following four years. “We are forecasting a difficult time for MTO producers in the 2022–26 period,” Nash said. “This will have an impact on methanol demand.”
Two new MTO plants are scheduled to start up in China by the middle of 2021, which will boost methanol demand until then. But after next year, no new MTO production is expected. “We’re not seeing growth in MTO capacity,” Nash said. “It’s the end of the first wave of MTO capacity in China.” He noted that the investment decisions for plants in the first wave were taken at a time of higher average crude prices.
Forecasts are also clouded by a lack of clarity around the Chinese government’s so-called E10 fuel policy on ethanol content in gasoline. China changed the E10 fuel policy last year to “encouraged” from “mandatory” and provided no update on implementation, which had been due in 2020.
China’s push to E10 would normally reduce demand for methanol and methyl tert-butyl ether (MTBE) in gasoline. Methanol demand into the gasoline pool has decreased steadily in the last few years, Nash said.
MTBE will remain the biggest demand outlet for methanol in China, said Ma. “Methanol into energy applications in China is driven by government policies and requires motivation from the consumer side,” she said. However, currently, “there is no strong policy for methanol fuel usage in China,” she added. Ma remains optimistic nevertheless on long-term developments for methanol in gasoline in the country.
IHS Markit is forecasting that a combined 1 million metric tons/year (MMt/y) of methanol capacity will close in central and eastern China in the coming years. “Most of the plants are old units using old gasification technology and their feedstocks are quite expensive,” Ma said.
However, IHS Markit predicts that 5 MMt/y of methanol capacity will come onstream in China during the same period, all based on coal gasification. “Capacity additions will be higher than capacity rationalizations,” she said.
The closure of older, less efficient methanol plants also reflects Chinese government policy to close chemical plants that are not in chemical parks and move the capacity to chemical parks, said Nash. “The new methanol plants we are seeing are big, modern, efficient units,” he said. “It is now difficult to get approval for smaller coal-based methanol units in China.”
As MRC informed previously, in early September 2020, Ningxia Baofeng Energy Group Co. (Baofeng Energy) selected KBR's proprietary cracker technology for its new methanol-to-olefins (MTO) project to be built in Ningxia, China. Under the contracts, KBR will provide process technology licensing and process design packages for Baofeng Energy's 500,000-t/y coal-to-olefins facility and its 500,000-t/y C2-C5 comprehensive utilization project. Once complete, the complex will be the "largest" single-train MTO plant in the world, KBR noted.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
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