IS METHANOL HEADING TOWARDS OVERSUPPLY? · HEADING TOWARDS OVERSUPPLY? MAHUA CHAKRAVARTY...

IS METHANOL

HEADING TOWARDS

OVERSUPPLY?

MAHUA

CHAKRAVARTYPETROCHEMICAL MARKETS

EDITOR

ARGUS

Petrochemicals, also called petroleum distillates, are chemical products derived from petroleum. Some chemical

compounds made from petroleum are also obtained from other fossil fuels, such as coal or natural gas, or renewable

sources such as corn or sugar cane.










London

Houston

Singapore

Moscow

Dubai

New York

Portland

Calgary

Santiago

Bogota

Rio de Janeiro

Beijing

Shanghai

Tokyo

Sydney

Astana

Kiev

Cape Town

Riga

San Francisco

Washington

Market Reporting

Consulting

Events

Is methanol heading towards oversupply?Kuala Lumpur, Malaysia

Mahua Chakravarty21 August 2018

Market Reporting

Consulting

Events

Agenda

• Global methanol market & changes• What’s happening in Asia• China MTOs & an update• A quick look at SEA & India• Conclusion

Copyright © 2016 Argus Media group. All rights reserved.

A global demand-supply snapshot

North America Production: 6 milConsumption: 7.5 mil

South AmericaProduction: 7.8 milConsumption: 2.1 mil

Western EuropeProduction: 2.8 milConsumption: 7.6 mil

Central EuropeProduction: 379 tConsumption: 1.2 mil

AfricaProduction: 2.4 milConsumption: 290 t

Russia and Central Asia Production: 4.2 milConsumption: 2.5 mil

Northeast AsiaProduction: 49.6 milConsumption: 62.5 mil

Middle EastProduction: 13.7 milConsumption: 2.9 mil

Southeast AsiaProduction: 3.2 milConsumption: 2.9 mil

South AsiaProduction: 290 tConsumption: 2.1 mil


Global methanol prices 2013-18

0.00

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CFR China FOB USG Contract FOB Rotterdam

High volatility seen with prices jumping about 50% of value


Global methanol demand growth outlook

43%

16%

12%

5%

15%

9%

Demand growth by sector- 2017

Traditional downstream Captive MTO/MTP Merchant MTO/MTP

Biodiesel Fuel Applications All Other


Global methanol demand by sector and region


Global methanol capacity versus demand growth

• Cumulative capacity growth has outpaced demand

• In 2017 an est 17. mil tonnesof cumulative growth contribution came from MTOs

• By 2021, 15 mil tonnes of cumulative growth will come from MTOs

• Iran is expected to add more than 4 mil tonnes of capacity

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2013 2014 2015 2016 2017 2018 2019 2020

Global methanol capacity 2013-20

Non MTO Production Capacity Captive MTO/MTP Methanol


Global methanol demand by production & region


Global methanol demand & trade flows by region

Market Reporting

Consulting

Events

Agenda



A demand-supply snapshot of Asia

IndiaProduction: 375 tConsumption: 2 mil

ChinaProduction: 49.6 mil Consumption: 57.7 mil

South KoreaProduction: 0Consumption: 1.7 mil

JapanProduction: 0Consumption: 1.7 mil

TaiwanProduction: 0Consumption: 1.7 mil

Southeast AsiaProduction: 3.2 milConsumption: 2.9 mil

Middle EastProduction: 13.7 milConsumption: 2.98 mil


Asia methanol prices 2013-18

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700.00

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CFR China CFR WC India CFR SE Asia

Volatility in Chinese prices seen with more active trading of futures in China.

• Middle East, with Iran and Saudi Arabia dominating with volumes

• Potential incremental volumes from Iran impose threat of higher supply

• But repeated production issues in Ar Razi and Zagros also impacted the overall volumes


Middle East dominates global exports

13%

30%

39%

18%

0%

Exports by region- 2017

Asia Europe Middle East & Africa Americas Australiasia

• Iran remains as the largest exporter to Asia, accounting for 50%

• Malaysia’s shares rise with stable production in Labuan

• US steps in with the start of new units since 2015-16


Iran leads global exports to Asia

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

10000000

2012 2013 2014 2015 2016 2017

Key regional exporters 2012-17

Iran Malaysia United States Venezuela

Indonesia China Singapore


Asia imports jump from 2015 on MTO growth

0 5000000 10000000 15000000 20000000

2012

2013

2014

2015

2016

2017

Imports by regions 2012-17

Middle East & Africa Americas Europe Asia

• Asia accounts for more than 50% of total global imports with China making up half of this

• In 2012, Asia made up 43% of global imports

• US imports have declined since 2015 on start ups


Asia methanol imports up with China & India

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

2012 2013 2014 2015 2016 2017

Asia methanol imports 2012-17

China Thailand Japan South Korea India

Singapore Malaysia Indonesia Philippines

• Asia imported est. 19 mil tonnes in 2017, a 50pc jump from 2012

• China accounts for nearly 45% of total imports in Asia

• MTO capacity growth the key factor pushing imports

Market Reporting

Consulting

Events

Agenda



Need for more olefins continue to push more MTOs to start


CTO start-ups to pick up pace till 2021


Olefins production margins from different processes

-1000.0

-800.0

-600.0

-400.0

-200.0

0.0

200.0

400.0

600.0

800.0

1000.0

Merchant methanol MTOmargins

CTO margins Naphtha cracker cash margins Ethane cracker cash margins PDH Cash margins

2016 2017 Jan-Aug 18


MTO margins come under pressure in 2017-18

-3000.0

-2500.0

-2000.0

-1500.0

-1000.0

-500.0

0.0

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1000.0

1500.0

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0

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MTO margins versus prices

Merchant methanol MTO margins East China ex-tank $/t equivalent Ethyle ne cfr NE Asia Propylene cfr NE Asia

Market Reporting

Consulting

Events

Agenda



A demand-supply snapshot of southeast Asia

IndonesiaProduction: 660 ktConsumption: 650 kt

MalaysiaProduction: 2 milConsumption: 720 kt

SingaporeProduction: -Consumption: 578 kt

ThailandProduction: -Consumption: 700 kt

VietnamProduction: -Consumption: 160 kt

BruneiProduction: 850 ktConsumption: 3 kt

PhilippinesProduction: -Consumption: 161 kt

Southeast AsiaTotal capacity: 4 mil Total Production: 3.2 milConsumption: 2.9 mil


China-SEA spread stays negative mostly

-10.00

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China-SEA spread 2013-18

China-SE Asia spread CFR China CFR SE Asia


SEA imports increase with regional demand growth

0

500000

1000000

1500000

2000000

2500000

3000000

2012 2013 2014 2015 2016 2017

Southeast methanol imports

Thailand Singapore Malaysia Indonesia Philippines Vietnam (est.)

• SEA imports have risen by 10-25% since 2012

• Thailand, Indonesia and Malaysia are key importers

• Vietnam remains a growing market


Indian pricing mostly at discount to China

-80.00

-60.00

-40.00

-20.00

0.00

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40.00

60.00

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01

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China-India spread 2013-18

China-India spread CFR China CFR WC India


India remains key emerging market

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

2015 2016 2017

India methanol imports- 2015-17

Iran Saudi Arabia Oman Malaysia Russia Others

70%78% 65%

• Iran remains as the major supplier

• Formaldehyde makes up about 70% of the total demand

• Fuel applications- still in early stages

• Domestic plants unable to operate on cost issues

• Growth forecast around GDP rates

Market Reporting

Consulting

Events

Agenda



Conclusion

• China will continue to add new MTOs and CTOs in the next few years, driving incremental demand. But margins to face pressure with high methanol prices and downstream pressure.

• Iran to add new plants but uncertainties and delays expected due to sanctions.

• Talks are still rife about Marjan starting production soon.

• In the near term Chinese prices may remain range bound as end-users and sellers remain locked in a stalemate.

• Shutdowns from Sep-Nov expected to cap supply excesses.

Copyright notice Copyright © 2016 Argus Media group. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this presentation you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus.

Trademark notice ARGUS, the ARGUS logo, ARGUS MEDIA, ARGUS DIRECT, ARGUS OPEN MARKETS, AOM, FMB, DEWITT, JIM JORDAN & ASSOCIATES, JJ&A, FUNDALYTICS, METAL-PAGES, METALPRICES.COM, Argus publication titles and Argus index names are trademarks of Argus Media Ltd.

Disclaimer All data and other information presented (the “Data”) are provided on an “as is” basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party’s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law.

Mahua ChakravartyPetrochemical Markets Editor

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IS METHANOL HEADING TOWARDS OVERSUPPLY? · HEADING TOWARDS OVERSUPPLY? MAHUA CHAKRAVARTY...

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