China’s MTO/CTO Industry Future Development Analysis

1. China’s CTO/MTO Industry Development Status

According to SCI, by the end of 2017, there were 22 CTO/MTO units in China, with the total capacity of 12,745kt/a.

2013-2017 China’s CTO/MTO Capacity Statistics

From 2013 to 2017, China’s CTO/MTO capacity expanded quickly with the compounded annual growth rate (CAGR) of 46.64%. In 2017, the major newly added MTO capacity included the 800kt/a at Shenghong Petrochemical (Lianyungang), the 300kt/a at Fund (Changzhou) Energy Development, the 700kt/a at Zhongtian Hechuang Energy and the expanded 30kt/a at Levima Advanced Materials.

2. The major downstream product, ethylene, is still in short supply.

Propylene and ethylene are the two major products of the CTO/MTO units. At present, the ethylene is still in short supply in China. By the end of 2017, China’s ethylene capacity was 23,300kt/a, and the output was about 18,220kt. However, its apparent consumption volume reached about 20,370kt, and the import dependence remained high with the import volume of about 2,160kt in 2017. Supported by wide and good downstream demand, the supply gap of ethylene still exists, and the import volume keeps increasing. For propylene, China’s propylene self-sufficiency rate has surpassed 90%. Meanwhile, the growth of propylene import volume has slowed down in response to more newly added coal-based and oil-based propylene units.

3. 2017 saw fine profit in the CTO/MTO industry.

2017 Steam Coal and Methanol Price Comparison

Although both the oil and coal prices moved up in 2017, the prices of methanol and olefin also rose by different extents. Taking some CTO project in Northwest China as an example, the annual average profit was above RMB 740/mt. In addition, the profit of coal-based olefin units was higher than that of oil-based units.

If the crude oil prices are maintained at $40-50/bbl, the profit of coal-based olefin units will be affected greatly. However, if the crude oil prices rally to over $60-65/bbl, the coal-based olefin units will have more economical efficiency.

4. The CTO/MTO industry faces a bright development future.

According to the 13th Five-Year Development Guide for Petroleum and Chemical Industries, China will speed up the upgrade of existing ethylene units. By 2020, China’s ethylene capacity is expected to reach 32,000kt/a with the annual output of about 30,000kt. Thereinto, the proportion of coal (methanol)-based ethylene will be above 20%. In the meantime, the CTO/MTO capacity should be expanded on the perfection of technology, improvement of resource utilization and environmental protection. Therefore, the CTO/MTO industry has a bright development future, and the capacity and output will continue to grow. 

According to SCI, with the newly added MTO units putting into operation from 2018 to 2020, China’s MTO capacity is expected to reach over 21,000kt/a.