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Insight | Time: May 19 2016 10:43AM
Northwest methanol vulnerable to MTO plant shutting down
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Shenhua Ningxia Coal closed its 1 million mt/yr methanol-to-propylene plant Monday for troubleshooting. Consequently, methanol price slid almost 100yuan/mt in two days to 1720-1760yuan/mt in Northwest China.

1. Vast methanol-to-olefins capacity
Since Shenhua Baotou’s 600kt/yr MTO plant, the very first one in history, came online in 2010, China’s methanol-to-olefins capacity has expanded to 8.995 million mt/yr up to now. About 27.525 million tons per year or 40% of China’s total methanol consumption typically goes into the MTO sector. About 64% of entire methanol-to-olefins capacity is located in Northwest China, which demands 17.82 million tons of methanol feedstock annually. Therefore, methanol market is vulnerable to MTO plant shutting down, especially in Northwest China.

2. MTO producers outsourcing methanol feedstock
MTO plants are generally integrated with upstream methanol production unit, which means that methanol market will be less impacted by the maintenance of those plants using internal methanol supply as feedstock, including Shenhua Baotou whose plant was closed for turnaround in April, and Datang Duolun and Ningxia Baofeng whose plants are under maintenance starting from early May. However, there are some other MTO producers having to purchase external methanol supply to fill the feedstock deficit and sate the appetite of their MTO plants. These plants, including Shenhua Ningxia Coal, Shenhua Yunlin and ChinaCoal Mengda, will bring about volatility in methanol by turning the market into supply overhang structure if they are closed unexpectedly. Shenhua Ningxia Coal’s shutting down and Shenhua Yulin’s cutting operating rate this week affirm that conclusion.

Methanol-to-olefins capacity in Northwest China (kt/yr)
Company Olefin capacity Integrated methanol capacity Methanol supply deficit Operation status
Shenhua Ningxia Coal 1# 500 1670 0 T/a from May 15, 25 days
Shenhua Ningxia Coal 2# 500 850 800 T/a from May 15, 25 days
Datang Duolun 460 1680 0 T/a from May 5, 45 days
Ningxia Baofeng Energy 600 2020 0 T/a from May 4, 25 days
Shenhua Baotou 600 1800 0 Restarted on May 6
Yanchang ChinaCoal Yulin 600 1800 0 Running stably
ChinaCoal Yulin Energy Chemical 600 1800 0 Running stably
Pucheng Clean Energy 700 1800 0 Running stably
Shenhua Yulin 600 0 1800 Operating rate cut
ChinaCoal Mengda 600 0 1800 Running stably
Total 5760 13420 4400  

In Jan-Apr this year, Northwest methanol hiked continuously, which was credited to Shenhua Yulin and ChinaCoal Mengda starting up their MTO plants. Adding to that is the turnaround season for methanol production plants. However, methanol market is trimming gains and poised for downward moves with MTO plants going offline for maintenance.
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