Environmental Issue Dented Shandong Methanol Downstream

Shandong Methanol Supply and Demand Pattern

In recent years, the methanol market in Shandong is facing short supply. The downstream consumption volume for methanol is increasing year by year. In southern areas the demand is mainly from the MTO and formaldehyde plants, and in the central and northern areas the demand is from the MTBE and hydrogen production. However, local methanol supply is limited, so large amounts of resources from other regions flow into Shandong. 

Before 2015, most of the methanol resources in the central and northern areas of Shandong came from northern Shaanxi and Inner Mongolia. Afterwards, with the MTO production in Northwest China growing, more methanol resources were consumed in the local market. But with the arbitrage window opening, the methanol resources from central Shaanxi and Shanxi were delivered to the central and northern areas of Shandong. In the southern areas of Shandong, local MTO production resulted in a supply shortage of methanol. Thus, the methanol resources from Henan, northern Jiangsu, central Shaanxi and Shanxi flowed into southern Shandong gradually. 

The methanol capacity in Shandong was 5,540kt/a in 2016, taking up about 8% of the total. Its methanol output accounted for around 14.5% of the total in China. However, local methanol demand volume reached 7,900.5kt, occupying around 16% of the total. 

In 2016, 29% of the methanol demand in Shandong was from the MTO production. Especially in the southern areas, the main methanol downstream fields are MTO and formaldehyde industries. This demand pattern will remain unchanged for a long time.

Influences from Environmental Protection Inspection

The environmental protection inspection is becoming stricter and stricter in China. Consequently, the influences on the methanol and downstream industries are more and more obvious. Overall, the methanol plants are not greatly influenced, benefiting from their environment-friendly devices and good control on pollution discharge. However, except MTO/MTP plants, the downstream production is heavily affected.

In Shandong, some medium and small plants have been ordered to close for reorganization or shut down. It is learned that up to the press, most of the formaldehyde plants in Linyi have been closed; all the DME plants will be closed in the next few days. The 100kt/DMF unit at Zhangqiu Riyue Chemical has stopped production. And some plants cut operating rates or restrict the time of loading and unloading, and the transportation is also influenced.

The decline in the operating rates in Shandong will also influence the methanol supply and demand in the surrounding areas. SCI will pay close attention to the related news about the environmental protection and safety production inspection.