OCTOBER 2016 HOPE LIES IN THE EAST · 2016-10-04 · 34th Annual World Methanol Conference/ Oct...

© 2016 IHS MARKIT. ALL RIGHTS RESERVED.

HOPE LIES IN THE EAST

34th IHS World Methanol Conference

OCTOBER 2016

Xiaomeng Ma

+86 10 65334692

[email protected]

- Prospects for Asia Methanol and Derivatives

mailto:[email protected]


Agenda • Asia Market Update

• Key Drivers

• Strategic Implications

34th Annual World Methanol Conference/ Oct 2016


Asia Leads the Global Methanol Industry


Capacity = 83 MMT Capacity = 115 MMT Capacity = 136 MMT

Source: IHS © 2016 IHS

NE Asia, 46%

SE Asia, 6%

ROW , 48% NE Asia,

54%

SE Asia, 6%

ROW , 40%

NE Asia, 52%

SE Asia, 5%

ROW , 43%

NE Asia, 53%

SE Asia, 5%

ROW , 42%

NE Asia, 63%

SE Asia, 4%

ROW , 33%

Demand = 53 MMT Demand = 74 MMT Demand = 95 MMT

Source: IHS © 2016 IHS

NE Asia, 68%

SE Asia, 4%

ROW , 29%

2011 2016 2021


Southeast Asia: Supply is Growing, but Demand is Stagnant

• Trade:

‒ Important regional merchant supplier

‒ Being challenged by growing low-cost

export from the Middle East and North

America

• Supply:

‒ Operational reliability has improved

‒ Potential increase: future coal-based

capacity in Indonesia

• Demand:

‒ Stagnant, mainly into conventional

derivatives and biodiesel


50%

60%

70%

80%

90%

0

1

2

3

4

5

6

7

8

11 12 13 14 15 16 17 18 19 20 21 26

Domestic Demand (3.4/3.3) Production (9.8/0.2)

Total Capacity (5.5/0.7) Operating Rate

Southeast Asia: Methanol Supply & Demand

Mil

lio

n M

etr

ic

Op

era

tin

g R

ate


Northeast Asia: Key Driver for Methanol Demand Growth


75%

80%

85%

90%

95%

-

10

20

30

40

50

60

7020

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

China Production China Net Import Taiwan, S. Korea & Japan China Demand %

Production and Demand (million metric tons) China Demand as percentage of

Asian demand


China: Both Demand and Imports are growing

• Supply:

‒ Mostly coal-based production

‒ Improvement in country’s operating rate

‒ Increasing dependence on imports

• Demand:

‒ Strong growth into MTO

‒ Emerging demand in energy applications,

but plenty of uncertainty on policy

• Trade:

‒ Growing demand for imports

‒ Target market for global new projects

‒ Global price setter


Production and Demand (million metric tons) Percent of Imports

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-

10

20

30

40

50

60

70

2011 2013 2015 2017 2019 2021

Production Net Import Demand Import Percent


Global Methanol Trade is Rebalancing

-30

-25

-20

-15

-10

-5

0

5

10

15

11 16 21 11 16 21 11 16 21 11 16 21 11 16 21 11 16 21

NAM SAM WEP MD NEA SEA

Methanol Net Trade

Mil

lio

n

Metr

ic T

on

s



Agenda • Asia Market Update

• Key Drivers



MTO: the key

demand driver • Many MTO projects have come on stream

• MTO methanol consumption can reach as

much as 16 million metric tons by 2017

• MTO operating rates are heavily influenced

by integrated C2/C3 downstream economics

• Coastal MTO projects drive surge in imports



Beside Existing Projects, some Projects are Under Construction

1

2

8

C

7

3 A

B

4 6

5

8100 Kt

7955 Kt


MTO/P

Company Location

Time on

stream

Max. MOH

Consumption

Tianjin

Bohua

Nanjing,

Jiangsu 2021 Phase 1: 1800

Luxi

Chemical

Liaocheng,

Shandong 2022 900

Nanjing

Wison

Nanjing,

Jiangsu 2025 1800

Location Consumption Olefin & Downstream

1 Zhongyuan PC Henan 600 Ethylene: 100 Kt (LLDPE), Propylene: 100 Kt. (PP)

4 Shandong Levima Shandong 1200 Ethylene: 170 Kt (EO, EVA); Propylene: 170 Kt (PP: 200 Kt)

6 Shandong

Hengtong Shandong 900

Ethylene: 100 Kt; (Ethylene dichloride: 345 Kt and 300 Kt PVC); Propylene: 200 Kt; (Propylene

Oxide: 200 Kt )

7 Shenhua Xiwan Shanxi 1800 Ethylene: 300 Kt (PE); Propylene: 300 Kt (PP)

8 Zhongmei

Mengda I.M. 1800 Ethylene: 300 Kt (PE); Propylene: 300 Kt (PP)

C I.M. Jiutai I.M. 1800 Ethylene: 300 Kt (PE); Propylene: 300 Kt (PP)

Locatio

n

Consum

ption

Olefin downstream

2 Fund Energy

(Ningbo) Zhejiang 1800

Ethylene: 300 Kt (EO, MEG),

Propylene: 300 Kt. (PP)

3 Nanjing

Wison Jiangsu 900

Ethylene: 100 Kt, Propylene:

200 Kt (butanol and octanol).

5 Zhejiang New

Energy Zhejiang 1800

Ethylene: 300 Kt (EO, MEG);

Propylene: 370 Kt (PP)

A Fund Energy

(Changchou) Jiangsu 1155

Ethylene-Propylene-Diene

Monomer (160 Kt)

B Jiangsu

Sailboat Jiangsu 2300

Ethylene: 370 Kt (PE, EO,

EVA); Propylene: 400Kt +60kt

(60 kt from OCU) (PP)


MTO Operations: despite poor MTO economics, integrated

economics remain reasonable

• A most practical way for private

companies to access C2/C3

• Low CAPEX

• Low entry barriers

• A way to break domestic

C2/C3 supply monopoly

• Reliable C2/C3 supply for

derivatives


0

500

1,000

1,500

11 12 13 14 15 16 17 18 19 20 21

Integrated Naphtha Cracker* PDH

MTO* (Basis: Shanghai, E China) CTO* (Basis: Inner Mongolia, NW China)

NEA Propylene Production Cost (per Metric Ton)

© 2016 IHS

0

500

1,000

1,500

11 12 13 14 15 16 17 18 19 20 21

Naphtha Cracker CTO MTO

NEA Ethylene Production Cost (per Metric Ton)


The Influence of the Methanol Futures Market

• Methanol futures started in Oct. 2011 as a hedging tool

• Major players: financial institutes, large private methanol producers, MTO companies, several methanol end-users, trading houses

• Publicly available delivery tanks in the coastal area

• Prerequisite for foreign companies participating in futures market - China legal branch and registered on ZCE through Chinese agencies


Spread (RMB)

0

20

40

60

80

100

1800

1850

1900

1950

2000

Spread Futures price MA09M Spot

Price (RMB)


A Summary of the China Methanol Futures Market

The Futures contract: Methanol, listed on Zhengzhou Commodity Exchange (ZCE)

Contract Size 10 tons/lot Daily Price Limits ±4% of previous trading day

clearance price & “ZCE Risk

Management Rules”

Tick Size 1 Yuan/ton Trading Hours Working days:

9:00-11:30; 13:30-15:00

Minimal

Margin

6% of Contract Value Last Trading Date 10th Trading Day of Delivery Month

Code MA Last Delivery Date 12th Trading Day of Delivery Month

Price

Quotation

RMB/ton Delivery Location ZCE appointed Delivery Warehouse:

21 in total in 2016

Agency Other 150 agencies Delivery Method Physical Delivery



China Trade: A Changing Face


0%

20%

40%

60%

80%

100%

2011 2015 2021

Iran Oman Saudi Arabia New Zealand

Malaysia Qatar US Trinidad

Major methanol exporting country to China

0 10 20 30

2011

2016

2021

Million Metric Tons

China Import Value in 2011, 2016, 2021


Major Chinese Importers 34th Annual World Methanol Conference/ Oct 2016

Top Methanol Importers into China in 2016

Company Business Type

Fund Energy MTO Producer

Zhejiang Xingxing MTO Producer

Chengtong Trading

Fujian PEAK Trading

Taicang JYPC Trading and Storage

Grand Petrochemical Trading

JOVO DME Producer and

trading

Jiangyin Goldenbridge Trading and Storage

Gangfeng Trading and Storage

Nantong Huaqing Trading

Iran 29%

New Zealand

19%

Oman 13%

Saudi Arabia 11%

Trinidad & Tobago

8%

Malaysia 4%

United States

4% Others

12%

2016 China Imports January to August 2016

- 2016 Jan-Aug China: 5.93 million metric tons

- Trinidad and US are the new sources of export

- 2016 import volume (E): around 8 million

metric tons (up by 40% from 2015 volume)


Methanol Affordability Comparison


29

4

2,2

17

1,8

69

2,1

44

25

4

2,2

47

1,8

73

2,1

04

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

Acetic Acid Formaldehyde DME MTO

RM

B / m

t

August 2016 July 2016 China Spot Methanol August 2016 China Spot Methanol July 2016

China Domestic Methanol Spot Affordability: August 2016 vs. July 2016

China Spot Methanol: August '16 - RMB 1855

July '16 - RMB 1861


China High-Cost Producer

• Producer margin varies by region

• East coast producers are among

the highest cost producers

• The increasing coal price adds

pressure to coal-based methanol

producers


250

300

350

400

450

500

550

600

650

700

200

250

300

350

400

450

500

5501

3M

ar

Ma

yJul

Se

pN

ov

14

Ma

rM

ay

Jul

Se

pN

ov

15

Ma

rM

ay

Jul

Se

pN

ov

16

Ma

rM

ay

Jul

Co

al P

ric

es

in

RM

B p

er

mt

me

tha

no

l p

ric

es

in

US

$ p

et

mt

Import methanol Import parity Coal prices

China Methanol versus Coal prices

-20

0

20

40

60

Ma

rgin

in

de

x

China margin index


Impact from Changes in Oil Prices

Impact on production cost: Minimal

China coal prices have been low,

and are not affected by changes in

crude oil prices

Low crude price makes coal

chemicals less competitive

Methanol production cost is

unaffected by changes in crude oil

prices

Impact on market price: Significant

Increasing connection between

methanol and base energy prices

Higher impact on the methanol

futures price than on spot prices

MTO economics are squeezed



Strategic Implications • China will remain the key growth country,

led by MTO and energy applications

• Asia capacity growth is slow; most of the

demand growth will be met by imports

• International trade will increase, and will

be the key to balance global supply and

demand

• The Chinese market will heavily

influence global pricing

IHS Customer Care:

Americas: +1 800 IHS CARE (+1 800 447 2273); [email protected]

Europe, Middle East, and Africa: +44 (0) 1344 328 300; [email protected]

Asia and the Pacific Rim: +604 291 3600; [email protected]

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© 2016 IHS. All rights reserved. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent of IHS. Content reproduced or redistributed with IHS permission must display IHS legal

notices and attributions of authorship. The information contained herein is from sources considered reliable, but its accuracy and completeness are not warranted, nor are the opinions and analyses which that are based upon it, and to the extent

permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage, or expense incurred by reliance on information or any statement contained herein. In particular, please note that no representation or warranty is given as to the

achievement or reasonableness of, and no reliance should be placed on, any projections, forecasts, estimates, or assumptions, and, due to various risks and uncertainties, actual events and results may differ materially from forecasts and statements

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