China Methanol Industry Shuffle Still Underway
At present, China’s methanol industry shuffle is still underway. Some leading companies further expand capacity to improve competitiveness, while some small and medium-sized units which are old and loss-making are phased out. The overall industrial competition is getting fiercer, and capacity iteration is inevitable.
China’s newly added methanol capacity is estimated at 5,300kt/a in 2022, down 2,750kt/a from last year. There are several characteristics of China’s methanol capacity variation. First, the commissioning time of newly added units is later than expected, and capacity growth slows down. Second, most newly added units are located in the areas rich in feedstock or demand. Third, eliminated capacity tends to increase.
In the recent years, China’s methanol companies have been less enthusiastic about investment, influenced by slightly widened supply-demand balance, high cost, dropped profits, etc. In the past six years, only 2021 witnessed relatively obvious capacity growth, and the CAGR was 5.34% from 2017 to 2021.
As seen from the above chart, these newly added methanol units are concentrated in Northwest China and East China, benefiting from local abundant feedstock and demand. In 2022, the newly added capacity in Northwest China is expected to rise to about 77%, and that in East China (Anhui and Shandong included) will be about 19%. However, given feedstock cost and downstream demand, East China and South China still need a large number of imported resources.
In the recent years, some leading methanol companies in China have expanded capacity continuously. At the same time, some units have been eliminated due to small scale, incomplete industrial chain, high cost, capacity replacement, etc. Upstream and downstream integration and portfolio upgrading have become the main development direction of the leading enterprises which aim to reduce the overall cost to the maximum extent and improve the competitiveness of enterprises in the industry. In 2022, the capacity expanded is estimated to further grow to 3,600kt/a, taking up over 67% of the total. In addition, the eliminated capacity will be about 1,000kt/a.
On the whole, China’s methanol capacity will still be slightly surplus, and the methanol industry will remain under the tug of war between price and cost in the next 3-5 years.
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