China's First Ethane Cracking Project Initiated in Zhangjiagang

On September 4, 2017, Zhejiang Satellite Petrochemical officially issued the CFA (Cooperation Framework Agreement) of the 4,000kt/a olefin comprehensive utilization demonstration industry zone project. The company signed the agreement to invest over 30 billion RMB in Lianyungang City to build the ethane cracking for ethylene project matched with polyethylene, EO and MEG units. Together with the PDH project matched with polypropylene, PO, acrylonitrile and acrylic acid units, the company will accomplish the industrial distribution of olefin cross chain process in succession. 

Meanwhile, this is the first officially approved ethane cracking for ethylene project in China (instead of the project at Oriental Energy in Caofeidian Port), and the company plans to import the U.S. ethane resources as feedstock source.

In July, the import volume for China’s undenatured ethanol (concentration at 80% or above) reached 282,714 liter, down 92.11% Y-O-Y, and the unit price was $0.49/L; while the import volume for China’s denatured ethanol reached 5,035 liter, down 99.98% Y-O-Y, and the unit price was $3.72/L, according to the statistics by Customs.

The export volume for China’s undenatured ethanol (concentration at 80% or above) was 19,814,068 liter, up 500.93% Y-O-Y, and the unit price was $0.5/L; while the export volume for China’s denatured ethanol was 251 liter, and the unit price was $6.49/L.

By comparison, we can find that the export volume of the ethanol increased notably in 2017, among which the undenatured ethanol took up 99.9% of the total export volume, and all those were corn-based ethanol.

Since 2017, the import volume for the ethanol slid greatly, which was mainly due to the increase in import tariff.

In recent years, corn stocks in China reached up to 0.24 billion mt. In order to address the surplus in corn stockpiles, China’s government introduced a series of policies, including the abolishment of stockpiling policy, corn deep-processing subsidy and export rebates of the corn-based ethanol.

Given these policies, the operating rate inched up, and more newly-added capacities were under construction. Moreover, the output of the corn-based ethanol increased rapidly, and traders were active to engage in the export business. Therefore, the export volume of the corn-based ethanol rolled up.

The corn deep-processing policy ended in June 30, but the pressure of corn stocks still existed in China. It is more likely that relevant departments will issue similar policies to stimulate the production and export of the corn-based ethanol.

SCI estimates that the corn-based ethanol will dominate the ethanol export market in the near future.

In August, the methanol production in South China was affected by typhoons and the upcoming BRICS summit. However, local methanol prices were stable-to-rising in August. Here SCI will make a brief analysis on the market development.

Supply: Although typhoons landed in Guangdong at the end of August, the influence on the arrival of domestic and imported cargoes was limited because of the short stay. In the Fujian market, local methanol operating rate was stable at around 50%, as the major plant was about 400km far away from Xiamen and its production was not influenced. Meanwhile, the trading in other areas except Xiamen was normal. On the whole, the overall methanol supply was normal in South China.

Demand: The major methanol consumers in Guangdong and Fujian are formaldehyde, DME and MTBE plants. According to SCI, except Xiamen, the overall operating rate of downstream units was maintained at 50%, and the load at a few producers even reached 90%. In end-August, the typhoons led to short-time shutdown in downstream plants, but the market trading was not affected heavily. Thus, the overall methanol demand was also stable.

In South China, methanol producers are fewer, and most market players are traders. As showed in the above chart, local methanol prices are closely related with futures prices and the prices in East China. The delivery of 1709 contract was smooth in August, and the price of 1801 contract was stable-to-rising. The players considers that currently the trend of methanol spot price follows that of futures price notably. Thus, the rising futures price boosted the trading confidence of spot players.

“Golden September and Silver October”- the traditional boom season is coming in China. Generally speaking, the downstream demand will recover somewhat, and the methanol prices will rise accordingly during this period. However, the inspection on environmental protection and safety production is so strict that whether the demand will recover remains to be seen. SCI predicts that the average methanol price in South China may continue to be stable-to-rising in September.