IHS Markit: Methanol demand growth driven by methanol-to-olefins, China demand

MOSCOW (MRC) — Methanol, a basic chemical used to produce fuels and other traditional chemicals, is increasingly used in China to produce olefins in a process called methanol-to-olefins (MTO), said IHS in its 2016 Sustainability Report.

By 2021, nearly one in five tons of global methanol production will be utilized for MTO production to satisfy expanding Chinese chemical demand, according to new analysis from IHS Markit.

In 2010, global methanol demand reached 49 MMmt, but by 2021, according to the IHS Markit World Analysis—Methanol 2017, demand will surpass 95 MMmt, with China boasting 54% of world capacity and 46% of global production. In 2000, China represented just 12% of global methanol demand, while North America and Western Europe represented 33% and 22%, respectively. By 2021, IHS Markit said Northeast Asia (dominated by China), will account for nearly 70% of global methanol demand, followed by North America at just 9% and Western Europe at 8%.

"China has quickly become the dominant force in the global methanol market, and continues to be the focal point with its coal-based production setting the global market price," said Mike Nash, global director of syngas chemicals at IHS Markit, and one of the authors of the IHS Markit World Analysis—Methanol 2017. "The impact of Chinese demand growth for methanol cannot be overstated, since we at IHS Markit forecast that Chinese demand growth is expected to increase very rapidly at around 7% per year, such that, by 2021, without additional Chinese capacity, net imports will double in volume from their 2016 level."

Chinese demand, Nash said, has grown significantly in traditional methanol derivatives, such as acetic acid and formaldehyde, the largest single methanol derivative and a key component for the production of construction and wood products, as well as high-strength engineering resins and a multitude of insecticide applications. However, newer end-uses such as light-olefins production and energy applications, such as direct blending into gasoline and the production of biodiesel and DME (dimethyl ether), are rapidly changing the methanol palette, the IHS Markit study said.

DME is used primarily as an aerosol propellant in the West, which represents a relatively small market overall, but its primary use is in fuel applications—where it is mainly blended into liquefied petroleum gas (LPG). This application is widely used by Chinese consumers for home cooking and heating, which has helped drive methanol consumption into DME from virtually nothing in 2000, to the fifth-largest methanol derivative in 2017, IHS Markit said.

China’s direct blending of methanol into the country’s gasoline pool is estimated at 7 MMmt in 2017, and is estimated to grow to almost 10 MMmt by 2026, as China seeks ways to supplement its gasoline pool. Growth in fuel production and gasoline blending now represents the second-largest methanol demand segment.

A newer and rapidly growing demand segment for methanol (exclusively in China) is in the production of light olefins using MTO technologies. In just four years, this end-use has driven staggering growth in methanol consumption and made MTO the second largest end-use for methanol globally.

The production costs of methanol-from-coal in China and from natural gas in the US are not only competitive on a cash cost-of-production basis, but also even when we consider capital charges and a return on investment," said Don Bari, vice president of IHS Markit, and co-author of the IHS Markit Process Economics Program (PEP) Methanol Process Summary March 2017. "That said, the relative (cash) cost or production positions are dependent on the cost of coal and natural gas. Coal-based technology in China had a clear advantage most of the last decade, before the impact of shale gas feedstock was felt in the US Then in 2008, the US natural gas route moved to the most competitive position, owing to a drop in gas price in the US as well as a rise in China feedstock, utility and fixed costs, on a US dollar basis," Bari said.

Feedstock costs for methanol comprise as much as 90% of the total cash-cost and, as such, access to low-cost feedstocks is key to methanol economics. The primary feedstock for methanol has been natural gas, representing as much as 55% of installed global capacity. Regions with access to low-cost natural gas have seen a surge in methanol capacity additions, including North America, the Middle East, Africa and South America. With the growth in Chinese methanol demand and the country’s rich coal reserves, the industry has seen a sharp rise in coal-based methanol production.

Uncompetitive feedstock economics led to capacity rationalizations in North America and Europe in the early 2000s, with North American methanol capacity all but extinguished by 2008. However, recent exploitation of unconventional natural gas supplies in North America has allowed this region to regain its position as a methanol production powerhouse.

"US Gulf production economics, once the dominant driver of industry economics, are now beginning to exert significant influence once again as a significant number of new methanol units are being restarted, relocated or being built in the US Gulf Coast region,” Nash said. “Producers are taking advantage of the cheap and abundant supply of US shale gas."

The sharp rise in North American production capacities and the cost position of these units has led to an increase in exports from the Americas that now ship product to both the European and Northeast Asian methanol markets. The expected growth in North American capacities will turn the region from a net importer to a net exporter during 2019, IHS Markit said.

"Supply and demand pressures have always driven methanol pricing, but now that methanol has significant volumes of derivatives that compete as alternatives to crude-oil derived products, the picture becomes significantly more complicated, since affordability of some methanol derivatives becomes heavily dependent on crude oil-price fluctuations," Nash said.
MRC

МОSCOW (MRC) -- Sonoco Products Company SON has expanded its ClearGuard portfolio of flexible packaging to include pouches for liquid or more viscous products, said the company on its website.

This latest development will help exceed barrier and shelf-life requirements for a variety of product categories and can also endure the high pressure and high temperatures involved in the retort process.

In Apr 2017, Sonoco launched its ClearGuard packaging, which comes with a transparent look and can be used as a substitute to aluminum foil or metalized films. ClearGuard provides transparency of products to customers without compromising the quality. It offers several additional benefits to brands and consumers, including exceptional laminating with superior flex crack resistance and durability, printing, including matte and gloss finish options, and a competitive value to other clear or opaque film alternatives.

This new ClearGuard liquid pouch optionis able to withstand the rigors of hot fill and retort cooking processes. Sonoco's ClearGuard packaging will be on display at the Global Pouch Forum in Miami.

As MRC wrote before, Sonoco commenced commercial production of rigid plastic containers for personal care products at its new USD15 million plant, located in the Beauty and Home Care campus in New Albany, Ohio.

Founded in 1899, Sonoco is a global provider of a variety of consumer packaging, industrial products, protective
packaging, and displays and packaging supply chain services. With annualized net sales of approximately USD4.8 billion, the Company has 20,000 employees working in more than 300 operations in 33 countries, serving some of the world’s best known brands in some 85 nations.
MRC

MOSCOW (MRC) — Malaysia's Petronas is set to auction one of its crude grades on the Dubai Mercantile Exchange, according to sources familiar with the matter, making the state-owned company the first to sell a non-Middle East oil on the trading platform, said Thestar.

Petronas has plans to offer September loadings of its Kimanis crude grade next month, the industry sources said. DME documents—updated in June and posted on the exchange's website—indicate Petronas trading arm Petco is looking to sell the Kimanis grade over the Dubai platform, although without providing any details on volumes or timing.

Petronas and DME did not respond to queries on the matter.

The move comes amid rising Kimanis crude output, with the August loadings of the grade expected to rise to a record 12 cargoes of 600,000 bbl each. Rising Kimanis production and an overall global surplus has pressured primary sellers of the grade, including Petronas, Royal Dutch Shell, Murphy Oil, ConocoPhillips, Petroleum Brunei and Pertamina.

Kimanis premiums plunged to their lowest in nearly two years at around $1.50/bbl to dated Brent in April, underscoring the difficulties sellers face in the current market.

"Kimanis needs to find new homes ... It's good to find new buyers apart from the usual end-users," a trading source who markets the grade said about Petronas' DME plans.

In a DME auction, potential buyers—who have to be pre-approved by the seller—will have two minutes to place bids after the company offering a cargo has set a minimum price.

"The auction does not mean a better price, but you get to set a floor price. So if you get better than the floor price, it's a good thing," said a source involved in the auction who is not approved to discuss the matter publicly.

Four cargoes of Middle East crude have been auctioned on the DME since January 2016. DME charges a 1.5 cent/bbl fee for cargoes sold via auction.

Kimanis is one of the largest Malaysian crude output streams. The Malaysian crude price mechanism introduced in 2014 was revised in January to add Kimanis to a benchmark formula based on the Labuan, Miri Light and Kikeh grades.

As MRC informed earlier, Petronas is looking to grow "aggressively" in specialty chemicals to meet demand in new regional markets and profit from higher margins.

Petronas, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company wholly owned by the Government of Malaysia. The Group is engaged in a wide spectrum of petroleum activities, including upstream exploration and production of oil and gas to downstream oil refining; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline network operations; marketing of liquefied natural gas; petrochemical manufacturing and marketing; shipping; automotive engineering; and property investment.
MRC

MOSCOW (MRC) -- Total has just completed an industrial scale test run, following a series of pilot plant trials, demonstrating the feasibility of sustainable incorporation of about 20% of post-consumer recycled polystyrene within virgin polystyrene (PS), as per the company's press release.

The trial, which was carried out on an existing production asset, successfully led to product with properties equivalent to virgin polymer.

"Polystyrene is one of the easiest polymers to recycle," explains Jean Viallefont, Vice President Polymer Europe. "Our success highlights that polystyrene, which naturally provides outstanding performance for various applications, will be a significant contributor to the Circular Economy. It is unquestionably an innovative way to enlarge the accessible market for recycled PS and to convert a large volume of post-consumer waste."

Based on this encouraging result, Total is launching new developments to manage contamination of recycled streams. The objective is to create a robust process in order to handle complex polystyrene waste streams that can be implemented on our different existing production lines.

As MRC wrote before, in 2015, Total said in a permit application to the Texas Commission on Environmental Quality (TCEQ) that its proposed new ethane cracker near the company's refinery in Port Arthur, Texas, was being designed to have a capacity of 1 million tpy.

Total S.A. is a French multinational oil and gas company and one of the six "Supermajor" oil companies in the world with business in Europe, the United States, the Middle East and Asia. The company's petrochemical products cover two main groups: base chemicals and the consumer polymers (polyethylene, polypropylene and polystyrene) that are derived from them.
MRC

MOSCOW (MRC) -- Celanese Corporation, a global technology and specialty materials company and a global leader in vinyl acetate ethylene (EVA) emulsions, has announced that it will increase the price for emulsions sold in Europe, said the producer in its press release.

Effective July 1, 2017, or as contracts otherwise allow, the following price increases will apply:

- EVA - EUR75/tonne;
- VAM Homopolymers (PVAC) - EUR75/tonne;
- VAM Copolymers - EUR75/tonne;
- Pure Acrylics - EUR180/tonne.

As MRC reported earlier, Celanese last increased prices of EVA emulsions in Europe on 1 April 2017, as follows:

- EVA - EUR75/tonne;
- VAM Homopolymers (PVAC) - EUR75/tonne;
- VAM Copolymers - EUR75/tonne;
- Pure Acrylics - EUR120/tonne;
- Styrene Acrylics - EUR120/tonne.

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Based in Dallas, Celanese employs approximately 7,300 employees worldwide and had 2016 net sales of USD5.4 billion.
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