Methanol sector should choose intensive production. (Market Report).

Methanol is an extremely important organic chemical raw material and has extensive applications in various sectors including chemical, pharmaceutical, light industry, textile and transportation. Its derivatives also have promising development prospects.

Major capacity expansion

China had 148 methanol producers in 2000. The total capacity was 3.482 million t/a, the output was 2.584 million tons (including the amount used by producers themselves) and the market demand was around 4.0 million tons. The average annual growth of the demand was around 14% from 1991 to 1999.

More than 30 of the existing 148 producers have suspended production or only make intermittent production. Evident factors in the situation include high production costs and low production capacity for most of them, and outdated process and equipment for others. Signs have already appeared heralding the elimination of small-sized units.

The methanol industry in China has been expanding fast since 1995. Feedstock used in the production has shifted from syngas generated in the methanol/chemical fertilizer co-production process, to natural gas and coal. Key factors in the rapid expansion include the development of new gas fields in Xinjiang, Sichuan and Inner Mongolia, the development and production of downstream products such as formaldehyde, olefins, acetic acid, MTBE, methyl esters and civil/automobile fuels and the development and production of catalysts in Southwest Research Institute of Chemical Industry and Research Institute of Nanjing Chemical Industrial Company, Ltd.

According to statistics from the 2001 project database in the State Development Planning Commission, several methanol projects using coal or natural gas as feedstock are being considered or prepared in China. 6 of them have a capacity of over 100 000 t/a each and the biggest capacity is 600 000 t/a. The total capacity of methanol projects planned for construction is 2.1262 million t/a.

Stable consumption increase

The consumption of methanol is closely related to the overall development of the national economy. The domestic consumption of methanol was 3.5 million tons in 2000. It was used mainly in derivatives (69%), fuels (7%), solvents (5%), pharmaceuticals (6.5%), pesticides (8.5%) and others (4%).

China imports great quantities of methanol each year to meet the market demand, and the domestic market price is increasingly linked to the international market. The demand expansion of formaldehyde and acetic acid has led to an increase in consumption of methanol in recent years. Some methanol plants have, however, suspended production or only work intermittently due to their own difficulties, and this means that the domestic market demand cannot be satisfied.

As can be seen from the above diagram, the methanol price in China is directly related to international market trends and domestic demand changes. Factors affecting the methanol price include the construction of large methanol units and the process technology, feedstock route, production capacity and management level in methanol production.

Huge market potential

Derivatives produced through intensive processing of methanol have reached more than 120 varieties. In China there are nearly 30 derivatives produced through the primary processing of methanol. In the chemical production, methanol can be used to produce formaldehyde, acetic acid, chloromethane, methyl amine, MTBE, PVA, dimethyl sulfate, DMT, dimethyl ether, methyl acrylate and methyl methacrylate.

The consumption of methanol in China has managed to sustain its increase in recent years and the average annual growth has reached 14%. Methanol is used mainly in chemical synthesis in China, and also as fuel and solvent. With the development of the national economy and the improvement of people's living standards, the demand for automobiles will increase in both domestic and overseas markets, and the consumption of gasoline will rise dramatically. The proven oil geological reserves in China are, however, just below 20.0 billion tons and the recoverable reserves are only 6.0 billion tons. The output of crude oil cannot meet domestic demand and the shortage of imported crude oil in China will reach 100 million tons in 2005.

Practice has proved that 1.5 tons of methanol is equivalent to 1 ton of gasoline. Based on the price in June 2001 expenses of methanol fuel are 18% lower than expenses of gasoline, and the tail gas pollution of methanol is also much less than gasoline. It can be seen from the analysis of production technology, cost price, field trial use and resources that methanol fuel is the most suitable substitute for automobile fuels. The development of methanol fuel for automobiles will promote the consumption increase of methanol. According to the survey made of major methanol-consuming products in 2001, the total demand for methanol in China in 2005 will be even higher than anticipated. Synthetic chemicals and fuels are expected to be the two major consumption fields for methanol.

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Table 1

Major Methanol Producers in China in 2001

('000 t/a)

                                               Time starting
Producer                             Capacity  production

Refinery of Qinghai Germu Oilfield     100      June 1999
Methanol Plant of CNPC Tuha             80      Oct. 2000
 Oilfield Co.
Yulin Natural Gas Chemical             120       May 1994
 Industrial Co., Ltd.
SINOPEC Sichuan Vinylon Works          230      Dec. 1979
Methanol Plant of Sichuan              100           1999
 Northwest Gas Mine
Hunan Dacheng Zidan Group Co., Ltd.     60      June 1992

Hunan Xiangdan Industrial Co., Ltd.     80      Feb. 1987

Hubei Zhongtian Jingmen Chemical        50           1997
 Industrial Co., Ltd.
Zhongyuan Chemical Industrial           80      Oct. 1992
 Co., Ltd.
Seng'ao Chemical Industrial Co.,        50
 Ltd.
Dezhou Hengsheng Chemical               70      Oct. 1994
 Industrial Group Co., Ltd.
No. 2 Chemical Fertilizer Plant of     100      June 1987
 Qilu Petrochemical Co., Ltd.
Shandong Lunan Chemical Fertilizer     100      July 2000
 Plant
Anhui Huaihua Group Co., Ltd.           75      Oct. 1973

Shanghai Coke Chemical Co., Ltd.       200           1993
Shanghai Wujing Chemical                80      Nov. 1975
 Industrial Co., Ltd.
Methanol Plant of Daqing Oilfield      160      Feb. 1991
Harbin Gasification Plant              140     Sept. 1993
Taiyuan Chemical Industrial Group       60           1963
 Co., Ltd.


Producer                             Feedstock

Refinery of Qinghai Germu Oilfield   natural gas
Methanol Plant of CNPC Tuha          natural gas
 Oilfield Co.
Yulin Natural Gas Chemical           natural gas
 Industrial Co., Ltd.
SINOPEC Sichuan Vinylon Works        acetylene tail gas
Methanol Plant of Sichuan            natural gas
 Northwest Gas Mine
Hunan Dacheng Zidan Group Co., Ltd.  coal (methanol/chemical
                                     fertilizer co-production)
Hunan Xiangdan Industrial Co., Ltd.  coal (methanol/chemical
                                     fertilizer co-production)
Hubei Zhongtian Jingmen Chemical     coal (methanol/chemical
 Industrial Co., Ltd.                fertilizer co-production)
Zhongyuan Chemical Industrial        coal (methanol/chemical
 Co., Ltd.                           fertilizer co-production)
Seng'ao Chemical Industrial Co.,     coal (methanol/chemical
 Ltd.                                fertilizer co-production)
Dezhou Hengsheng Chemical            coal (methanol/chemical
 Industrial Group Co., Ltd.          fertilizer co-production)
No. 2 Chemical Fertilizer Plant of   residuum
 Qilu Petrochemical Co., Ltd.
Shandong Lunan Chemical Fertilizer   coal (methanol/chemical
 Plant                               fertilizer co-production)
Anhui Huaihua Group Co., Ltd.        coal (methanol/chemical
                                     fertilizer co-production)
Shanghai Coke Chemical Co., Ltd.     coal
Shanghai Wujing Chemical             coal (methanol/chemical
 Industrial Co., Ltd.                fertilizer co-production)
Methanol Plant of Daqing Oilfield    natural gas
Harbin Gasification Plant            coke oven gas
Taiyuan Chemical Industrial Group    coal (methanol/chemical
 Co., Ltd.                           fertilizer co-production

Source: S. J. Chem.
Table 2

Methanol Projects Planned for Construction in China

('000 t/a)

Owner                       Capacity   Investment    Construction
                                      (RMB million)     period

Inner Mongolia Yihua
Group Corporation             265          5 160     2000 - 2002
Panjin Chemical Industrial
Co., Ltd.                     100            199     2001 - 2003
Shanxi Guoyang Xinneng
Co., Ltd.                      50         257.34     2001 - 2002
Baotou Natural Gas
Chemical Industrial Base      300       5 880.63
Shanxi Yangqu Energy
Development Co., Ltd.          30          1 600     2001 - 2003
Hubei Chemical
Fertilizer Co.                200          1 700     2001 - 2004
Xi'an Huayu Chemical
Industrial Co., Ltd.          600        1 695.8     2001 - 2003
Handan Coal Chemical
Industrial Corporation         81       2 754.27     2001 - 2004
Shanxi Modern Coal
Industrial Co., Ltd.          200              -     2001 - 2003
Zhongyuan Chemical
Industrial Co., Ltd.          300         500.44

Owner                       Progress


Inner Mongolia Yihua
Group Corporation           installation
Panjin Chemical Industrial
Co., Ltd.                   submitted for approval
Shanxi Guoyang Xinneng
Co., Ltd.                   financing
Baotou Natural Gas
Chemical Industrial Base    submitted for approval
Shanxi Yangqu Energy
Development Co., Ltd.       submitted for approval
Hubei Chemical
Fertilizer Co.              submitted for approval
Xi'an Huayu Chemical
Industrial Co., Ltd.        submitted for approval
Handan Coal Chemical
Industrial Corporation      submitted for approval
Shanxi Modern Coal
Industrial Co., Ltd.        starting construction
Zhongyuan Chemical
Industrial Co., Ltd.        approved

Source: S. J. Chem.
Table 3

Consumption of Methanol in Derivatives in China

('000 t)

                    Consumption  Consumption  Consumption  Growth
                      in 2000      in 2001      in 2002      (%)

Formaldehyde           1 920        1 996        2 075       4.0
Acetic acid               82          152          280      85.0
Mixed methyl amine        99          109          120      10.0
MTBE                      90          945          990       5.0
PVA                     28.6         29.2         29.8       2.0
DMT                     24.4         24.8         25.2       2.0
Chloromethane             26           32           40      25.0
Others                   160          172          183       7.0

Total                  2 430      2 609.5        2 852

Source: S. J. Chem.