Is methanol still a serious excess
With the rapid expansion of coal-to-methanol projects across China, a heated debate has emerged over whether methanol production will face severe overcapacity in the near future. The core disagreement lies in the projected balance between domestic methanol supply and demand in the coming years.
According to data from the China Petroleum and Chemical Industry Association, there are currently 88 methanol projects under planning or construction, with a combined capacity of 48.5 million tons per year. Recently, CNOOC announced plans to build an additional 1.13 million tons/year methanol facility, expected to come online in 2008. Once completed, CNOOC’s annual output will reach 2 million tons, making it the world’s largest methanol production base. Meanwhile, Inner Mongolia Shenhua Baoji Shiller is set to launch a 1.8 million tons/year project, while Xinjiang Yili is planning a massive 5.4 million tons/year methanol plant along with 1.8 million tons/year of olefins. Given this momentum, many industry experts have expressed concerns about potential oversupply in the domestic methanol market.
Liu Zuozhou, executive vice president of the Shanxi Provincial Federation of Industrial Economics, estimates that by 2010, national methanol production capacity could reach 50 million tons, far exceeding the estimated demand of less than 20 million tons. In recent years, China’s methanol consumption has remained between 4 million and 6 million tons annually. Wang Wenxi, deputy general manager of Shanghai Coking Co., Ltd., also highlighted that most new methanol facilities are expected to be operational between late 2007 and early 2008, leading to a peak in production from 2008 to 2009. This could result in a significant surplus after 2008.
However, Chen Weiguo, secretary-general of the National Committee for Alcohol Ether Fuel and Alcohol Ether Clean Cars, argues that overcapacity is unlikely. He presents four key reasons: first, although many companies are pursuing methanol projects, only a few are actively moving forward. Second, the technology for converting methanol into olefins and dimethyl ether is still not fully developed, meaning not all projects will successfully produce methanol. Third, rising production costs will force some smaller players out of the market. Natural gas-based methanol costs have increased, and small-scale producers are struggling due to high expenses. Lastly, the National Development and Reform Commission has paused approvals for coal chemical projects, causing delays in coal-to-methanol initiatives and curbing uncontrolled investment. Based on these factors, Chen believes that by 2010, national methanol production will be around 20 million tons, with demand exceeding 16 million tons.
This ongoing discussion highlights the uncertainty surrounding China’s methanol industry and the need for careful policy and market monitoring.
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