MTO Start-Ups to Benefit China’s Methanol Demand

China’s methanol demand will advance with the imminent start-up of a methanol-to-olefins (MTO) plant. However, weakness in downstream olefins markets may dent consumption within the close to term.

At Ningxia Hui Autonomous Region in China.  Nanjing Chengzi Clean Energy’s MTO plant would require about 1.8m tonnes/year of feedstock methanol when in full operation.

The MTO unit – which has designed capacities of 240,000 tonnes/year for ethylene and 360,000 tonnes/year for propylene – began trial runs on 26 June.

Furthermore, Luxi Chemical and Zhong’ an Lianhe Chemical are anticipated to begin conducting trial runs at their plants in July, however, won’t have to purchase methanol from the spot market, in keeping with market sources.

Luxi Chemical’s 290,000 tonnes/year MTO unit in Shandong province has its methanol units. As soon as the MTO unit start-up, the company will discontinue selling methanol and sell olefins as an alternative.

Zhong’ an Lianhe Chemical’s 600,000 tonnes/year coal-to-olefin (CTO) unit in Anhui province has its downstream polypropylene (PP) and polyethylene (PE) units.

The coal-to-olefins/MTO sector accounted for 43% of China’s total methanol consumption of 63.3m tonnes in 2018.

However, methanol demand may be weighed down by weakness in downstream markets corresponding to ethylene, monoethylene glycol (MEG) and polyolefins, which erodes margins for CTO/MTO producers.

The present high average operating fee of China’s CTO/MTO units at 80% – held up by excellent efficiency of some downstream products like propylene – may fall.

In early October to mid-November 2018, run charges at major CTO/MTO plants in China fell to as low as 60%, prices of ethylene plummeted sooner than these of methanol.

Zhejiang Xingxing, Zhongyuan Petrochemical and Shaanxi Pucheng Clean Energy Chemical had shut their plants with a mixed capability of 1.59m tonnes/year through the interval; whereas Fund Energy (Ningbo), Shandong Levima Advanced Materials and Jiangsu Sailboat all curtailed run rates.

Given a 3:1 methanol-to-olefin manufacturing ratio, ethylene costs should be priced three times larger than methanol.

In mid-June this year, the ethylene-methanol spread has fallen under the required level that makes MTO production cost effective.