Developments in China s methanol market and implications for global supply Seoul Anu Agarwal 8 May 2015 London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Riga Market Reporting Consulting Events
Argus Media: a leading energy price reporting agency (PRA) World s largest independently held energy markets PRA Founded in 1970, 700 staff in 23 countries Provider of commodity price indexes and energy market intelligence Covering crude oil, petroleum products, gas, coal, power, transportation, LPG, emissions, fertilizers, petrochemicals Publishes 8000 price assessments a day Present in Asia since 1986 with 88 staff in Singapore, Tokyo, Beijing, Shanghai, Dubai, Sydney, Mumbai, Jakarta, Manila
Agenda Chinese methanol production Methanol imports and inventory China methanol demand growth feedstock fuel chemicals MTO economics Market outlook Market Reporting Consulting Events
China produces half of the world s methanol Million tonnes Global methanol production, by region CAGR 15% 61% 50% 4% 8% Copyright 2015 Argus Media Ltd. All rights reserved.
China s methanol capacity to double in four years China methanol capacity growth 12% 41%
Coal-based methanol dominates Coal-based methanol s share to be almost 80% of China s total methanol capacity by 2018 China methanol capacity by feedstock (CTO 18%) (CTO 54%)
Coal market remains under downwards pressure. High natural gas prices restrict methanol production Natural gas High natural gas prices and supply limitations hamper gas-based methanol output Coal Weak coal prices due to overcapacity and stricter environmental laws offers firm coal-methanol margins
Coal-based methanol margins narrow on lower crude price Attractive margins: China coal prices has slid by 45% since January 2012. Methanol prices fell by 17%. But coal-to-chemicals is losing its cost advantage with lower crude. China coal methanol margins $84/t $156/t $149/t $65/t
China s methanol production at new highs China s monthly methanol output increasing year on year. Natural gas methanol is shrinking but coal-to-methanol is strong Operating rates rise to 59% in 2014 from 50-51% in 2012-13 Firmer coal-to-methanol margins and emerging demand from olefins drive up domestic production China monthly methanol production
China imports methanol to cover 10% of demand China meets more than 10% of its demand through imports Average import volumes are about 400,000t, with 40% from Iran, 38% from the rest of the Middle East, 12% from southeast Asia and 10% from New Zealand and other countries. Million tonnes China methanol imports by region
Inventories may fall further on emerging demand China s methanol inventories fell in early 2015 after reaching a peak at about 1.1mn t at the end of 2014. This may fall further. Thousand tonnes China s methanol inventories in coastal storage
Derivative capacity expansions mostly from CTO/MTOs 2015-16: MTOs (5.5mn t/yr), CTOs (4.2mn t/yr) and MTGs (1.2mn t/yr); With high conversion ratio, MTO and MTG are strong demand boosters Derivative expansions, methanol equivalent
CTO margins narrow amid lower crude prices Olefins margins by feedstock CTO margins attractive, but are losing their competitiveness on lower crude prices MTO margins improved in 2014, but narrowed in 2015 on tight methanol balance
Merchant MTOs support methanol demand growth Merchant MTOs methanol demand to quadruple in two years Merchant MTOs expand at rapid pace Existing capacity 2.2mn t/yr By 2015 2.4mn t/yr will be added In 2016 another 1.7mn t/yr will be added Methanol demand from MTO Million tonnes
Merchant MTO highly cost sensitive Merchant MTO margins vs methanol/ethylene prices
China s MTBE capacity expands at high speed MTBE is an essential gasoline additive as an oxygenator, closely tracking gasoline prices
Chinese DME suffers losses and weaker demand Chinese DME plants ran at 30-35% in 2014 on 13m t/yr capacity amid weak demand and squeezed margins. 90% DME is used as a blendstock in LPG. Its blend ratio in residential LPG was around 20-25% in 2013-14 China DME cash margins vs DME/LPG prices
Formaldehyde in prolonged demand lull Formaldehyde demand hit by weak real estate market in China. Operating rates at 60-65% in 2014 China s construction of new commercial residential area
Acetic acid profitable on tight balance Acetic acid producers enjoyed higher 2014 profits amid tight balance on plant disruptions and firm derivative demand. But its boost to methanol demand is limited because of restricted production with average operating rates at 70% Cash margins for Chinese acetic acid producers
Conclusions China has half of global methanol output and the share will rise to 60pc by 2018 with rapid CTO/MTO expansions. Coal-based methanol margins narrowed on lower crude, but potential weaker coal prices will lift methanol margins. China s methanol demand will grow rapidly by 23pc CAGR in 2014-18, mainly boosted by the olefins sector. Merchant MTO economics are vulnerable; MTO plant operation status affects supply-demand and sentiment. MTG expanding but economics affected by low crude prices. Chemical and fuel demand growth are flattening.
Argus DeWitt weekly/annual/outlook reports Methanol & Derivatives Methanol Outlook If you would like to have a free trial of the report please email: singcom@argusmedia.com
London Houston Washington New York Portland Calgary Santiago Bogota Rio de Janeiro Singapore Beijing Tokyo Sydney Dubai Moscow Astana Kiev Porto Johannesburg Riga
Anu Agarwal VP, Petrochemicals, Asia Email: YM : Anu.agarwal@argusmedia.com Anu_argus Copyright notice All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, ARGUS MEDIA, the ARGUS logo, DEWITT, FMB, FUNDALYTICS, METAL-PAGES, JIM JORDAN & ASSOCIATES, JJ&A, ARGUS publication titles and ARGUS index names are trademarks of Argus Media Limited. Disclaimer All data and other information presented (the Data ) are provided on an as is basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.