It is reported that Mike Nash, vice president of synthetic gas chemicals business at IHS Markit, said that since last year, global methanol demand has softened due to geopolitical threats, the economic performance of China's methanol to olefin (MTO) unit and the decline in unit operating rate, as well as the demand for methanol in Chinese fuel. At the 37th Annual Meeting of IHS Markit global methanol plant held in Berlin, Germany, Nash said that IHS Markit has lowered the expectation of global methanol plant operating rate, which is expected to decline from 2020.
Geopolitical influence demand
Nash said geopolitics is leading to increased uncertainty in the international methanol market, which will also lead to a decline in consumer confidence and demand. Trade frictions between the United States and China are damaging the economies of the two countries, and China is the world's largest methanol market, accounting for 59% of the total global demand. U.S. sanctions on Iran have restricted the export of methanol from Iran to China and India, the main producer of methanol. Recently, the attack on Saudi Aramco's oil production facilities shows that Saudi Arabia's production facilities are under protected, and Saudi Arabia is also a major methanol producer.
At the same time, there have been explosions and safety incidents at three chemical plants in China this year, including two methanol and acetyl plants, which have reduced the demand for methanol in China. Nash said that this has prompted the Chinese government to strictly control and inspect the environment of domestic chemical plants, especially small ones, which will reduce the production of formaldehyde. Formaldehyde is the second important methanol demand area in China, accounting for 23% of its methanol demand.
MTO outlook pessimistic
Nash said MTO's outlook will also become more pessimistic, with it accounting for 24% of China's total methanol demand. MTO in China, including methanol to ethylene and propylene, is the most expensive process in the world. Nash said that the low international crude oil prices in the past two years have improved the competitiveness of naphtha cracking units and challenged the economy of MTO.
The economic performance of MTO will be the main influencing factor of methanol price for a long time. According to IHS Markit, the break even price of methanol in China's non integrated MTO units is expected to be lower than the actual methanol price in China in the next 10 years. Therefore, the average operating rate of MTO units in China (currently about 79%) is expected to drop to 65% - 70% in 2022-2026. Unless crude oil prices rise, Mr Nash said, MTO will enter a difficult period.
IHS Markit said China's E10 gasoline policy aims to increase ethanol content in gasoline and will also curb the demand for methanol and MTBE as a blending component of gasoline. In 2020, China's full implementation of E10 gasoline policy will bring a major challenge to the use of MTBE in gasoline. Currently, 4.4 million tons of methanol are used to produce MTBE in China every year. However, due to the ethanol capacity under construction in China and the fact that the current capacity is far lower than the expected demand next year, there may not be enough ethanol to meet the demand for the full implementation of E10 gasoline policy in 2020.
New capacity will be released soon
IHS Markit said that in the past year, global methanol prices have been falling due to the decline of China's MTO device economy and operation rate, US sanctions against Iran and Sino US trade war. Methanol is expected to recover from the fourth quarter of 2019 to the middle of 2020, and then remain volatile in the second half of 2020.
At the same time, the slowdown of Iran's methanol production capacity will also be offset by the acceleration of us methanol production capacity. Nash said U.S. sanctions on Iran will delay new methanol projects in Iran, and some new methanol projects in the United States will be put into production earlier than expected.
IHS Markit forecasts that China's methanol consumption will decline in 2022, mainly due to the decline in methanol demand from MTO and fuel sectors. IHS Markit forecasts that the annual growth rate of China's methanol demand from 2018 to 2024 will be 1.9%, far lower than the annual growth rate of more than 10% from 2008 to 2018.
Meanwhile, the Sino US trade war has increased China's methanol import tariff to the United States from 5.5% to 30.5% in September 2019. According to IHS Markit, the United States is becoming a net exporter of methanol, and tariffs may lead to the diversion of methanol from the United States to other Asian countries. According to IHS Markit, there will be about 6 million tons / year of new methanol production capacity in North America in the next five years. Among them, the United States will build four new methanol units, Trinidad will build a new unit.